YAHAPALANA AS A WAKE UP CALL Part 3B
Posted on August 30th, 2018

KAMALIKA PIERIS

The phosphate deposit at Eppawala  was discovered  in 1971 during a survey conducted by the Department of Geological Survey. It was given to a DDC for its exploration in 1974, and was later taken over by Lanka Phosphate Ltd,  (LPL) a company fully owned by the GOSL. Eppawala contains 60,000,000 metric tons of phosphates within 4 square kilometres..

In 1992 it was decided to call for proposals for the manufacture of phosphate fertilizer using Eppawala. In view of the chemical composition of this rock, such as high chlorides and high oxides of iron and aluminum causing serious corrosion of plant and equipment, as well as a reduction in filtration rate, foreign collaboration had to be sought to get over the these technological difficulties and  use this deposit for the manufacture of fertilizer for export,” said Industrial Development Minister C.V. Gooneratne.

Six proposals were received by the government in 1994 but only one, Freeport MacMoran was selected.   Reason give was that only Freeport McMoran had the required technology to process the Eppawala apatite deposit. They are also one of the leading phosphate fertilizer firms in the world

Initial discussions on the proposed project were held with Freeport MacMoran Resource Partners of USA and their agents here between 1994 and 1996. The first round of negotiations was in March 1994 under the UNP government. The second was in March 1995 and the third in December 1996.

On the conclusion of negotiations Freeport MacMoran made representations to the President saying they could not agree with some of the conditions and also ‘the language used.’ These included the Income Tax Act and the Environmental Acts. President Chandrika Kumaratunga  had then directed officials to conduct a “final round of negotiations and clear all outstanding issues along with the tests of the agreement” following a request made by McMoran.

Even the Attorney General has pointed out that this type of intervention could seriously obstruct a fair negotiating process, and is an indirect way of binding the Negotiating Team to agree to the final terms and conditions laid down by foreign companies, however disadvantageous and unfavorable they are to the people of Sri Lanka, observed Batty Weerakoon, in 2000.

A committee comprising, B. C. Perera, Secretary to the Treasury, Sarath N. Silva, attorney general, K. Austin Perera, Secretary Ministry of Industrial Development, Thilan Wijesinghe, Chairman/Director-General BOI, and Vincent Panditha, Senior Advisor, BOI and Consultant Ministry of Industrial Development  was appointed to conduct a final round of negotiations. That round of negotiations was conducted between July and August 1997, and thereafter the Agreement was initiated by the  Secretary/Ministry of Industrial Development and representatives of Freeport MacMoran.

The B.C.Perera Committee’s final round of negotiations in furtherance of the Tender ended in August 1997. The Report tendered after this round  is titled, “Report of the Negotiating Committee on the Joint-Venture Agreement with M/s Freeport McMoRan Resource Partners of USA for the manufacture of rock phosphate fertilizer for export utilizing the rock phosphate deposit at Eppawala.” The Report says that in this final round of the Negotiating Committee the drafts of the Mineral Investment Agreement and the subsidiary Agreements were agreed upon and initialled by S/Ministry of Industrial Development and representatives from Freeport McMoRan Resource Partners and IMC Agrico.

However,  Freeport McMoran is not the joint-partner in the Eppawala project, noted Batty Weerakoon, it is IMC-Agrico. Free-Port McMoran Resource Partners Ltd., had transferred all their phosphate fertilizer businesses, including the mining and sale of phosphate chemicals, to IMC-Agrico, in 1993. IMC Agrico , though a company in its own right, is no more than a front for the operations of McMoran, said Weerakoon. This meant that the successful tenderer. McMoran, had substituted another as the joint venture partner. McMoran makes the Agreement but a dummy signs it.

Sri Lanka had agreed to a 30 year deal worth $425mn  ,the Eppawala phosphate mining and Trincomalee fertiliser production joint venture” for exporting Di-Ammonium Phosphate manufactured in Sri Lanka using Eppawala rock phosphate,  a Mineral Investment Agreement was signed with    IMC Agrico and Tomen Corporation  , signing for Freeport MacMoran. Under the deal, IMC and Tomen will respectively control 65 and 25 percent of equity in the joint venture, with the balance, ten percent, going  to state-run Lanka Phosphate Ltd. Tomen is a Japanese construction company.

IMC and Tomen would  will be allowed to mine and export up to 3.6 mn metric tons of phosphate — in rock form — for the first 12 years, after 18-months and 15-months of exploration and feasibility study. Experts observed that the investors would get enough profits on rock export sales to repay bank loans and recover the bulk of their outlay. The government would be paid 5.5 percent of the phosphate’s estimated market value. The fertiliser will also be sold domestically at a reduced price of five percent off FOB.

The deal also allowed the foreign firms to explore over an area of 56km sq, and scour a buffer zone” extending to 10 kms from the Eppawala deposit boundary. This  so-called ‘buffer zone’ equals a surface area of at least 750km sq, observed critics.  The foreign investors have asked for and have been given a buffer zone of ten kilometres in radius around Eppawala. That works out to more than 700 square kilometres. This is really madness. This company is not prospecting in unexplored territory.

The government also gave the foreign partners in this joint venture a package of concessions. Among other adjusted concessions, the BOI has waived the normal 20-year tax holiday for investors, replacing it with a five percent corporate income tax that will increase to 15 percent after 12 years of operations. There is also  a clause which stipulates that a larger quantity of rock could be exported with the express authority of the Secretary to the Ministry of Industrial Development.

The agreement also called for the construction of a processing plant and deep water dock at Trincomalee, to be linked to Eppawala via a specially-built railway line. After the plant is built in an estimated three years on 450 acres of land, with an extra 300 acres of beach front kept in reserve, it will produce up to 600,000 metric tons of hi-grade Di-Ammonium Phosphate .

The government justified the project on the grounds that the country lacks the know-how, the capital, and machinery to tap into this motherlode on its own and undertake such a high-risk industry as large-scale mining,

Certainly Sri Lanka lacks the technology to exploit the Eppawala deposit by itself and make money from it, said the  experts.  Foreign investment is necessary. But the government failed to maximize on  the deal . The government has played a weak hand in the deal. . The government has virtually dealt IMC and Tomen a monopoly over Sri Lanka’s important phosphate reserves, locking out other potential foreign investors. Eppawala is a relatively low-risk venture, the government should have pressed for at least 20 percent free equity to LPL.

Australian mining industry consultant, Richard Tinsley had       told the Cabinet-Appointed Negotiating Committee to insist on LPL being paid $12.5mn for the 25mn metric tons of confirmed reserves.  In the case of rock exports during the first twelve years of running, he has advised that profits from sales abroad be split 50-50. This would have guaranteed Sri Lanka an extra $13mn in revenue.

Tinsley had also  recommended that during the first decade of operations, two percent of profits from sales should also be placed in a trust fund to compensate those who may have to be uprooted, and to guard against possible environmental degradation.The investors did not agree to this and are only giving a $500,000 bond for the first ten years.

Batty Weerakoon writing in 2000 said the contract was against the law. The Mines and Minerals Act No. 33 of 1992 law does not permit such a contract. There is provision only for a mining licence.  Therefore, McMoran  was to operate on the license issued to Lanka Phosphate Ltd. Lanka Phosphate would transfer its license for exploration and mining to a  “Project Company” known, ironically, as Sarabumi. Mining Area” was loosely defined  as the land within the exploration area which is covered by the mining licenses issued to the company by the Geological Survey and Mines Bureau.” .

B.C. Perera Report said “A serious attempt was made to get the two foreign investors to also sign the MIA [Mineral Investment Agreement]. However they did not agree and stated that they have followed the present pattern everywhere. The Project Company which will be a signatory to the Agreement will represent them”. Certainly the Project Company will represent them, said Weerakoon, but they are not liable under the Agreement.

Weerakoon pointed out that only the locally incorporated Sarabumi will  be held liable on the Agreement. For the damage that is possible as resulting from the mining operations. McMoran and IMC Agrico will not be liable. By the time the question of damaged environment comes up ,the foreign shareholders would have cleared out of the scene .

This Agreement   had to get round  the law in other sectors too. That has to be done unnoticed by the law and the law makers. To amend the law to accommodate McMoran would be  scandalous, observed Weerakoon.  Regulations which are not legal have been smuggled in to accommodate this contract. One such regulation, said “Special negotiations in the form of an Investment Agreement may be conducted by the Secretary with any private sector proponent or participant with regard to the terms and conditions of and supplementary rights and obligations under such agreement.”

There is no provision in the law for the Secretary to the Ministry of Industrial Development to enter into such an Agreement, either observed Weerakoon.  The preamble to the draft Investment Agreement states that the Secretary to the Ministry of Industrial Development enters into the Agreement representing the Government of the Republic of Sri Lanka  on the orders of the Cabinet, by virtue of the powers vested in them by the Constitution of Sri Lanka.”

This purported authority, issuing from the Regulations is meant to give to the Investment Agreement a spurious legality for the purpose of protection under the Investment Treaty. However, once an Agreement of this nature is made and signed by a Government under its own Regulations,  it cannot, according to Clause 157 of the constitution, be disowned in court, said Weerakoon.

Anil Amarasekera  drew attention to alleged human rights abuses committed by Freeport-McMoran at its gold and silver mining operations in the Indonesian-occupied West Papua (Irian Jaya). Freeport is accused of having a hand in mass-disappearances, torture, and murder  in Irian Jaya  when in 1965 Suharto took power . Freeport stayed  on for 30  years, with USA support. The events in Sri Lanka are a carbon copy of what happened in Indonesia, Freeport may have a similar sinister motive here too, coming behind a  front” company, IMC Agrico ,said Amarasekera.

Scientists strongly objected to the Agreement. In May 1998, the President of the National Academy of Sciences Prof. V. K. Samaranayake wrote to the President  saying the “project in its present form was premature as the vital data relating to the actual size and quality of the mineral deposit have not been adequately surveyed and established”.

In July 1999, a committee of 12 scientists of the National Science Foundation submitted a report drawing attention to the fact that the proposal of the U.S. Mining Company was highly disadvantageous to Sri Lanka, with highly adverse impacts on the environment  and pointed out ways of exploring the resource with long lasting benefits to the country.

The scientists declared that there were serious economic and social implications in the Agreement. McMoran was getting the exclusive privilege to export 13.6 million tonnes of raw rock phosphate during the first 8 years earning around 400 million dollars by paying only 5% of the earnings to the Sri Lanka Government. This was supposed to be for the “financial comfort “of the company The FOB value of 21.6 million tonnes mined over a 30 year period amounts to $ 673 million, but the direct income to Sri Lanka is a meager $107 million.  The established full deposit will be depleted in 25 years. Mining in 56 square kilometres will displace a large number of villagers from their traditional areas.

The National Academy of Sciences in their recommendations to the Government  said a complete geological survey is necessary. They also  recommended the manufacture of single superphosphate as a fertilizer to satisfy the local requirement,  not fertilizers such as ammonium phosphates. Peradeniya scientists have shown that using home-grown technology Eppawala apatite crystals can be made soluble. And the deposit used to supply the agricultural needs of the country.

Eppawala is not a big deposit  by world standards , but for the use as fertilizer raw material for the farmers of Sri Lanka, it is a resource which should be managed with great care and utilized wisely, the possession of a strategic mineral deposit like Eppawala requires wise resource management taking into account the long-term interests of the nation.

Environmental conservationists warned that the project will bring environmental and infrastructural degradation to Zone-H of the  Mahaveli Development Scheme. If mining takes place as proposed, up to a depth of about 100 meters, within 20 years, it is most likely that this area will become uninhabitable,” says the Environmental Foundation Ltd. Due to the possibility of irrigation and other water resources getting affected, people of this area will face a problem regarding their daily requirements of water, both for drinking and other purposes.”

Eppawala residents also spoke up.  They feared that due to the project, around  12,000 families in the area would be forced off their land and re-settled elsewhere,.We will not go. We will not leave from our village lands and homes even if we were to be forcibly chased out,” says Venerable Mahamankadawala Sri Piyaratana Thera, the North-central Province’s Deputy Sanghanayaka, and President of the Committee for the Protection of Phosphate Deposits at Eppawala.

The public went to courts against the project. An FR application was made In October 1999. seven petitions alleging infringement of fundamental rights guaranteed by Articles 12 (1); 14 (1) (g) and 14 (1) (h) were filed in the Supreme Court against the Eppawala project. They were made by seven persons of Eppawala including the Ven. Mahamankadawala Piyaratana Thera of Galkanda Purana Viharaya, Eppawala, and had the Secretary, Ministry of Industrial Development, Sarabhumi Resources (Pvt) Ltd, Geo-Resources Lanka (Pvt) Ltd. and the Attorney General among the eight respondents.

The case was against a most disastrous agreement the GOSL was to have formally entered into with a foreign company and/thro its agents in SL for the exploration etc of the mineral phosphate deposits at Eppawala, said Haris de Silva.

The petitions cited as Bulamkulame and Others v. Secretary Ministry of Industrial Development and Others (Eppawala Case) SC (FR) Application No. 884/99 was heard in the Supreme Court by a panel of three judges: Amerasinghe J., Wadugodapitiya J., and Gunasekera J.

After a lengthy trial the judgment was delivered on 2nd June 2000 by Justice A. R. B. Amerasinghe, with Justices Wadugodapitiya and Gunasekera agreeing. Immediately after the delivery of the judgment it was hailed, both locally and abroad, as a landmark judgment in the area of fundamental rights.

Following is the Order given by the Court on March and April 2000:”For the reasons set out in my judgment, I declare that an imminent infringement of the fundamental rights of the petitioners guaranteed by Articles 12 (1), 14 (1) (g) and 14 (1) (h) has been established.”There is no assurance of infallibility in what may be done; but in the national interest, every effort ought to be made to minimize guesswork and reduce margins of error. Having regard to the evidence advanced and the submissions of learned counsel for the petitioners and respondents, in terms of Article 126 (4) of the Constitution, I direct the respondents to desist from entering into any contract relating to the Eppawala phosphate deposit up to the time,”(1) a comprehensive exploration and study relating to the (a) locations, (b) quantity, moving inferred reserves into the proven category, and (c) the quality of apatite and other phosphate minerals in Sri Lanka is made by the third respondent, the Geological Survey and Mines Bureau, in consultation with The National Academy of Sciences of Sri Lanka and the National Science Foundation, and the results of such exploration and study are published and”(2) any project proponent whatsoever obtains the approval of the Central Environmental Authority according to law, including the decision of the superior Courts of record of Sri Lanka (Amerasinghe. J) This is  SC case 884/99 (FR) dated 2nd June 2000]

In 2005 a second attempt was made to get at the Eppawala deposit. Public Enterprise Reform Commission (PERC)  called for expression of interest from foreign or local agencies for the development of the Eppawala phosphate deposit on a public/private partnership basis, it commences the second attempt to dispossess this natural resource belonging to the people of Sri Lanka, observed Haris de Silva.

Haris de Silva in 2005 drew attention to the Supreme Court judgment. The very detailed judgment of the learned judge clearly shows the devious ways thro which the GOSL was trying to maneuver its way to award the contract to Freeport MacMoran for the supposed economic benefits to the Sri Lankan people, when in fact it would have ruined not only the present generation living in that area, but would cause the degradation and destruction of an entire ecosystem centered in and around Anuradhapura. In fact, the judge did not mince his words when he said ‘in my view the proposed agreement seems to circumvent the laws and in its implementation is biased in favor of the company as against the members of the public

The analysis by the judge of the various clauses in the agreement, the very inept submissions made to court by the counsel for the respondents, the uninformed statements made by the S/Ministry of Industrial Development, all in their attempt get the agreement accepted as it was,  show for whose interests the government officials were working so hard.

If the contract was awarded on the basis of that agreement, the resultant activity would have devastated Eppawala and its environs, destroying part of Jaya Ganga. But those were not to be the considerations of the government officials who were privy to the project proposal. One would not fail to see that their interests were with the private contractors and not with the present or future generations of Sri Lankans, continued Haris de Silva.

Finally, it may be asked what the necessity is to bring in foreign participation to this project, when it has been so clearly shown by our scientists of no mean repute that the resource can be most effectively managed by our own expertise to benefit the country for well around a millennium or more years. The duty of any government is to work for the public good of the country and not for private gain, concluded Haris de Silva.

The present day Yahapalana government, which is notoriously  pro America, has announced in June  2018 that it  planned to use the  Eppawala rock phosphate deposit to produce Single Super Phosphate  the initial cost , estimated to be Rs. 2 billion, would  be borne by the government, Minister for Agriculture Mahinda Amaraweera  had appointed a  committee  headed by Prof. O.A. Illeperuma of Peradeniya University to  comment on the feasibility of the project. The report was favorable

Neville Ladduwahetty, sees the implications. He has used the media to draw attention to the earlier judgment. Justice Amerasinghe’s judgment stipulated conditions that must be followed before entering into any contractual agreement on this matter, Ladduwahetty said.

Justice Amerasinghe said, I direct the respondents to desist from entering into any contract relating to the Eppawala phosphate deposit up to the time (1) a comprehensive exploration and study relating to the (a) locations, (b) quantity, moving inferred reserves into the proven category, and (c) quality of apatite and other phosphate minerals in Sri Lanka is made by the third respondent, the Geological Survey and Mines Bureau, in consultation with The National Academy of Science of Sri Lanka and the National Science Foundation, and the results of such exploration and study are published, and (2) any project proponent whomsoever obtains the approval of the Central Environmental Authority according to law, including the decisions of the superior Courts of record of Sri Lanka.”

Ladduwahetty added, It is to be noted, that any environmental inquiry has also now to take cognizance and comply with Principle 17 of the Rio de Janeiro Declaration, vide principles 6 and 7 of Stockholm and principle 15 of Rio, as stated in the judgment. Thus, it is obligatory for PERC, as the present GOSL agency handling the subject, to comply with the directives of the Supreme Court. It would also be prudent for them to inform the public, to establish transparency, as to what their modus operandi is in this instance.

They, and the GOSL, should also bear in mind that they are not the owners of the Eppawala or any other phosphate deposit in the island, but are only administrators of such resources for the time being, and all natural resources in the island belong to the people of Sri Lanka, as so ably and effectively stated in the SC judgment,

The judgment of Justice Amerasinghe, as well as the reports and representations made to the President, the number of books and monographs published on the subject, and the numerous articles that appeared in the media showing the irreparable damage that would be caused to the environment etc. by the proposed project must surely be available to the President and to the members of the PERC. They cannot be swept under the carpet, ignored and forgotten, concluded Ladduwahetty.

Prof. O. A. Illeperuma of the Peradeniya University who headed the technical committee responded. Recent decision of the Minister of Agriculture has prompted reader Neville Ladduwahetty to point out the legal ramifications arising from the Supreme Court decision on Eppawala apatite he said. The expert committee which drafted the current report was fully aware of the legal aspects which have to be considered, Illeperuma said.

This Supreme Court decision arose due to six villagers challenging the handing over of the Eppawala deposit to the McMoran Company for a song, which would have completely wiped off this deposit from Eppawala in 25 years. However, this kind of law, stifling further action is not the way to go. If there are legal obstacles LPL can petition the Supreme Court again and I am sure that in light of the earlier decision, the Supreme Court will give a favorable decision.

For the Government to “go ahead with exploitation of (the) Eppawala rock phosphate deposit” it could only mean that the Government is confident that it has fulfilled the conditions imposed by the Order of the Supreme Court. The Government has to be absolutely sure that it has met all obligations set out in the Court Order if serious consequences are to be avoided. otherwise, it would mean that the Government is not only in violation of the Order imposed by the Supreme Court, but is also in violation of the fundamental rights of the petitioners who petitioned the Court.

The BC Perera committee included none with background knowledge on this deposit, or the scientists who have toiled hard for over two decades and showed that this deposit can be developed in Sri Lanka with our own experience. Although there was a committee of subject experts which recommended that the proposed project is detrimental to the country, and that we should go for a single superphosphate plant to satisfy the needs of Sri Lankan farmers, their report was conveniently sent to the waste paper basket.

The negotiating team never considered the manufacture of single superphosphate, which at that time could have been produced at $40 a tonne while the manufacture of ammonium phosphate would have cost $232 a tonne. The negotiating team members probably did not know the difference between these two fertilizers.

In 2007, when Lanka Phosphate Ltd. (LPL) planned to commence a single superphosphate plant, due consideration was given to all these aspects and there were no objections to the proposed project from anyone, including the villagers involved in the Supreme Court case. At a meeting this writer had with Mahagalkadawala Piyaratana Thero, popularly known as Eppawala hamuduruwo, along with Prof. Chandana Udawatte, Chairman, Lanka Phosphate limited, Piyaratana thero gave blessings for the proposed project after learning all facts.

Attorney General has also  informed LPL that as per Supreme Court decision, the deposit can be used for value addition as long as LPL does the mining and satisfies all environmental regulations. Then the authorities abruptly removed the Chairman of LPL who has a Ph.D. in Eppawala apatite and was the one who initiated the project. The only logical explanation is that some politician who wanted to rake in a substantial amount of money by selling the deposit to a foreign company, wanted the Chairman removed.

The process of making single superphosphate is technologically simple and involves simple mixing of the powdered rock with sulphuric acid. From 2001-2005, LPL made nearly 20 tons of it and tested the product in all agricultural areas of the country. The results were extremely encouraging with our product giving better yields compared to imported phosphate fertilizer. This is because our product had sulphur, another essential nutrient for plant growth.

This conclusively established that we can prepare good quality fertilizer from our deposit and also that it is suitable to substitute imported fertilizer. It also rubbished the myth that we cannot make fertilizer out of our deposit because of various impurities such as chlorine, iron and aluminium, and only a giant such as McMoran has the necessary technology to make phosphate fertilizers from our Eppawala ore. To satisfy the current requirement of phosphate fertilizers, it is necessary to produce about 200,000 tons of single superphosphate per annum, requiring about 125,000 tonnes of rock phosphate. At this rate the deposit could last for 480 years.

The cost of constructing a factory to produce this fertilizer in Sri Lanka is estimated to be around Rs. 1400 million, and this is only a small fraction of the Rs. 5 billion which the Government spends now on the fertilizer subsidy. The pay-back period of this project is estimated to be 2.5 years and hence a highly profitable venture.

So now with the action of the current Minister of Agriculture, Mahinda Amaraweera, it gives a ray of hope for the long failed operation to produce phosphate fertilizers in Sri Lanka, concluded Illeperuma. (concluded)

Leave a Reply

You must be logged in to post a comment.

 

 


Copyright © 2018 LankaWeb.com. All Rights Reserved. Powered by Wordpress