Power sector corruption second only to CB bond scams –Anti-Corruption Front
Posted on April 2nd, 2017

Over USD 3,700 mn worth foreign investment on hold while costly diesel plants in operation

By Shamindra Ferdinando Courtesy The Island

Accusing the Power and Renewable Energy Ministry of favoring costly diesel power generation, the Anti Corruption Front (ACF) has urged the Sirisena-Wickremesinghe government to immediately review a series of investment proposals to establish liquified natural gas (LNG) plants.

The ACF has called for reappraisal of the entire power generation plan to prevent an influential few from making a killing at the expense of the national economy.

ACF’s Executive Director Rajith Keerthi Tennakoon yesterday told The Island that both the previous government and the present administration hadn’t taken advantage of several proposals to set up LNG plants.

Tennakoon alleged that fresh investments had been blocked by top bureaucrats with the connivance of politicians. In fact, the situation had deteriorated since the change of government in January 2015 with those at the helm of the power sector taking decisions severely inimical to the national economy. Tennakoon cited the purchasing of coal from Swiss Singapore Overseas Enterprises Pvt Ltd at nearly USD 10 per tonne more than the market price as an example. “Each shipment cost Sri Lanka nearly Rs 100 mn more than the current market price,” Tennakoon said.

Tennakoon claimed that Sri Lanka’s premier investment promotion agency the Board of Investment (BoI) had been struggling to secure necessary approvals for LNG projects.Responding to a query, Tennakoon said that a Canadian investment amounting to USD 550 mn in LNG sector had been on hold since Sept 2005.

“Corruption in the lucrative power sector is second only to the Central Bank bond scam. The country is paying a very heavy price for corruption,” Tennakoon said. Four top officials who had been directly involved in the then President Mahinda Rajapaksa’s re-election bid in January 2015 were responsible for ruining the power sector today.

Attorney-at-law and BOI chief Upul Jayasuriya said that the Canadian investment was meant to establish 488 MW LNG plant at Kerawalapitiya. Jayasuriya said that instead of acting swiftly and decisively to secure the investment those responsible for decision making in the vital power sector had been delaying projects. Asked whether he couldn’t confirm Tennakoon’s allegations that several projects had been held up for want of approvals, Jayasuriya said that altogether five projects estimated to be worth USD 3753.8 mn had been pending though the delay couldn’t be blamed on one party in respect of all proposals.

The Canadian project had been held up since 2005 pending CEB approval, Jayasuriya said, adding that a proposal made in Sept 2011 in respect of an American investment amounting to US 1000 mn couldn’t get off the ground for want of CEB approval. The US investment had been the largest of the five projects and was intended to establish LNG storage and regasification plant as well as 500 MW power plant at Hambantota, Jayasuriya said.

According to him, the previous government hadn’t been able to secure an investment amounting to US 750 mn from Hong Kong for the establishment of 600 MW LNG plant and LNG intake terminal in June 2008 for want of CEB’s approval. Jayasuriya said that the same Hong Kong investor had proposed the setting up of LNG power plants for Katunayake and Biyagama Export processing Zones (EPZs) as well as LNG intake facility at Kerawalapitiya. The proposal worth USD 325 mn made in Nov 2016 had been pending subject to necessary approvals, Jayasuriya said.

The BOI Chief said Sri Lanka couldn’t afford to prolong the decision making process especially at a time foreign investment was required.

In addition to the Hong Kong investment proposal that had been made in Nov 2016, the BoI received two other project proposals from Indian and Chinese investors in July and Dec 2016, respectively The Indian investment worth USD 400 mn was to establish LNG intake and processing facility at Kerawalapitiya and the Chinese investment amounting to USD 728.8 was to be made at Hambantota. According to the BOI chief, in respect of the Indian project cabinet approval as well as Petroleum Resources Development ministry were required whereas the Chinese project awaited releasing of land in Hambantota.

Tennakoon said that the CEB’s controversial move to build a combined cycle power plant at Kerawalapitiya with the intention of transforming it to LNG facility in three years at a colossal cost to the cash-strapped government should be examined against the backdrop of long overdue approval for foreign investments in the same sector. Tennakoon said that the CEB was planning to invest nearly Rs 7 bn on the project at a time the government was struggling to meet its overseas loan commitments.

Both Jayasuriya and Tennakoon said that inordinate delay in accepting foreign investments was causing losses to the economy.

Tennakoon revealed that the foreign investors had been denied approval even after they received an assurance from President Maithripala Sirisena that their projects would be facilitated. The assurance had been received by investors when they met President Maithripala Sirisena early last year, Tennakoon said, alleging that yahapalana government seemed to be as corrupt as the previous lot.

Tennakoon urged parliament to inquire into what was happening in the power sector. The ACF official pointed out that since the change of government, the yahapalana administration had paved the way for gradual re-launch of diesel power generation facilities at a tremendous cost to the country.

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