Govt looking into explosives sector after safety, transparency and conflict of interest issues dog sole private dealer Rabdhuen

Concerned with an Anti Corruption Commission (ACC) report against Rabdhuen, the sole private company dealing in explosives, and also a separate Royal Bhutan Police (RBP) report, the cabinet is looking into the possibility of the government taking over the explosives sector.

The cabinet already met and discussed the issue a few months ago and is expected to take a final decision soon after the Bureau of Law and Order (BLO) and the RBP submits a detailed joint report on the explosives sector, including the possibility of the RBP taking over the explosives sector.

The ACC report presented in the cabinet said that its cursory enquiry showed that Rabdhuen was not following the 1989 Explosives rules and was violating safety norms. It said that there was a danger of explosives falling in the wrong hands.

The ACC in its report expressed deep concern and recommended that the Home Ministry review its ‘unwritten policy’ of liberalizing licensing for importing and distribution of explosives. It has also asked the ministry to double its efforts in monitoring and supervision.

The RBP report while not naming Rabdhuen or State Trading Corporation Limited (STCBL) listed down 16 cases of illegal possession of explosives by private individuals from 2009 to 2013 including one case in August 2013 that had lead to the death of a Bhutanese citizen in Chaskar under Mongar Dzongkhag. Some of these cases were found in sensitive areas like the border region with India.

This is also in the backdrop of a recent Druk Holding Investment Chairman’s letter to the Home Ministry and Ministry of Economic Affairs pointing out that as per the 1989 Explosives rules flowchart STCBL is shown as the sole importer and main distributor of explosives.

Apart from the main concerns of security and legality there are issues of conflict of interest and transparency in how a sensitive license for explosives, which was initially only under STCBL, a government owned firm, was give to a private firm.

The former cabinet in December 2010, based on a submission by the Home Ministry decided to allot the license to Rabdhuen Private Limited.

However, there was no open notice, tendering, auction or public notification inviting people or companies to apply for this sensitive but highly lucrative license.

The first Managing Director of the company in 2011 and one of the initial seven shareholders was Duptho Rinzin Dorji who was one of the main co-founders of the then ruling party Druk Phuensum Tshogpa. Duptho by his own admission was also a regular donor for the DPT party fund.

It has also been found that the then Home Minister Lyonpo Minjur’s wife, Aum Deki Palden in 2012 was allotted 10,000 shares worth Nu 1 million. In the same year she sold the shares back to the company and got Nu 1 million along with some dividends. The Home Ministry was the main authority on explosives license and it was the Home Ministry which recommended Rabdhuen’s case to the cabinet on the basis of de-monopolization and competition. The Home Ministry is also the main regulatory and monitoring authority for the explosives business from providing police escorts to ensuring that the explosives rules are followed.

Another shareholder is a Mrs Kinley who in 2012 bought 50,000 shares worth Nu 5 million. She is the wife of the former Director of Industries, Sangay Wangdi who was also STCBL Chairman from 2008 to 2011 December. STCBL is the only rival company of Rabdhuen that deals in explosives. When Sangay Wangdi was Chairman of STCBL, his board in 2010 June had met the Home Minister and objected to any private competitor being let in on various grounds from safety to transparency. In July 2010 the board drafted a formal letter signed by Sangay Wangdi putting the objection on record.

A STCBL official on the condition of anonymity said, “The plan was that the board members would all gather at one place and then collectively approach the then Home Minister with the letter. However, we waited for a long time and the Chairman did not turn up. Later on when we called the Chairman on the phone he said that he was already with the Home Minister and had discussed the issue.”

The chairman of the Rabdhuen Pvt Limited board holding the maximum shares is a Kaentsho Sumpai Dhendup, a PDP candidate from Nubi-Tangsibi who fought both the 2008 and 2013 elections but had lost. He is currently also a member of the Executive committee of PDP representing Trongsa. He told this paper that he had applied for the license under his name in April 2007 and March 2008 with the Home Ministry but got nowhere. He said he was advised by the ministry to form a company and apply. As a result the company Rabdhuen was incorporated and formed in 23rd August 2010. Kaentsho also by his own admission said that he had recently donated some money for the party fund of PDP.

The main supply market of explosives for both STCBL and Rabdhuen was the Punatsangchu Hydroelectric Project. STCBL originally had two ‘Magazines’ built by the project authority where they were storing explosives for supply to PHPA. However, on Rabdhuen getting the license the former government in 2011 through PHPA asked STCBL to vacate one Magazine and it was given to Rabdhuen a private company.

Though licensed in only late 2010 and starting operations in only mid 2011 with an initial capital of Nu 17.5 mn that increased to Nu 50 mn by 2013, the company rapidly too over STCBL’s market share. Rabdhuen today is the bigger player in the market with more revenue than STCBL. At the same time there are also questions on how Rabdhuen prospered so fast.

This paper has a copy of controversial letter written by a contractor, Ugyen Dorji in November 2011 to the former Home Minister. The contractor says that the Home Ministry (as per normal process) had granted approval to buy explosives from STCBL for some road construction work in Rubesa gewog under Wangdiphodrang dzongkhag.  However, the contractor in his letter says that he could not procure the explosives from STCBL ‘as the Punatsangchu Project who provides the funds for the purchase of explosives mandates it to be purchased from Rabdhuen Private Limited.’

This is a controversial practice as all contractors who receive funds from the Punatsangchu project have the right to procure raw materials and explosives from where they want. PHPA MD R.N Khazanchi in response to a question told the paper that PHPA has no right to decide from whom contractors buy.

However, instead of questioning or looking into such a controversial letter the former Home Minister on the same letter wrote to the BLO asking them to change the approval for procurement of explosives from STCBL to Rabdhuen. According to a source this was a highly controversial move as approvals to purchase explosives given by the BLO is highly sensitive in nature and cannot be subject to change.

In 2012 Rabdhuen earned revenues of Nu 247.69 mn and declared Nu 15 mn as profit after tax which was all given as dividends. In 2013 it earned revenues of Nu 267.54 mn and declared Nu 10 mn in profit after tax which was also all given as dividends.

By comparison STCBL in 2012 had revenue of Nu 176.26 mn and declared a profit after tax of Nu 18.50 mn. In 2013 the revenue was Nu 161.23 mn with a profit after tax of Nu 16.92 mn.

During the tenure of the previous government the STCBL came under a special audit of the Royal Audit Authority that revealed various lapses in the functioning of the STCBL from missing explosives to other financial issues. This report also came out in the media bringing the agency under scrutiny.

This paper contacted all those named above to get their response on the above issues.

The Rabdhuen MD, Duptho Rinzin Dorji denied there was any conflict of interest in him being a co-founder of DPT and having shares in Rabdhuen and heading it. He said that all the processing work for the license with the Home Ministry was done by Kaentsho a PDP candidate. He said that he became the company MD and shareholder only in 2011 after the license was given.

Duptho said, “The former government wanted to de-monopolize the explosives sector and support the private sector. Moreover there was increasing demand from the hydropower sector.”

On the ACC report, he said that ACC had caught one Rabdhuen staff while investigating another case not related to Rabdhuen. However, the person had also been questioned by ACC on Rabdhuen too and hence a separate report had been issued on Rabdhuen by ACC.

On the Home Ministers wife being issued Nu 1 mn worth of shares, Duptho claimed that it was bought by the minister’s wife from her own money. He said since the minister’s wife was from the same village he had asked her to buy shares. He said she sold her shares in the same year as she needed the money to build a resort in Trashigang.

In response to a question Duptho said that while he had helped facilitate meetings for private Indian hydropower construction companies and other agencies, he was not paid anything in return nor was he employed by them.

He said that Rabdhuen followed all rules and procedures like the 1989 Explosives rules and had a good safety track record.

The former Home Minister on being contacted declined to comment on the entire issue.

Former STCBL Chairman and now BBPL MD Sangay Wangdi said that there was no issue of conflict of interest as his wife had bought the shares in 2012 which was around a year after he left the STCBL post. He also said that he had objected to any private company coming in when he was the STCBL chairman.

Kaencho Sumpai Dhendup on his part said that STCBL had a monopoly on the explosives business for 25 to 30 years. He said that before presenting the issue to the former cabinet the Home Ministry had done a study. He said in the study Dzongkhags had said that while they had to make advance payments to STCBL the explosives did not come on time and got delayed. He said though STCBL was opposed from the beginning to Rabdhuen’s entry the customers were suffering due to poor service.  He said STCBL had raised quality issues with Rabdhuen’s explosives but the complaints if any should come from customers and not a rival company.

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