YAHAPALANA AND CORRUPTION Part 2A.
Posted on March 26th, 2019

KAMALIKA  PIERIS

REVISED 2.4.19

This essay is a follow up of the matters discussed in the first essay. It is confined to happenings in 2017 and 2018.

NATIONAL IDENTITY CARD

The head of the National Identity Card division was to be removed from office for opposing a racket, said Campaign for Free and Fair Elections (CaFFE). He had refused to award a tender illegally to a company nominated by the Minister to take photos for the proposed electronic identity cards.  Instead of the company which bid Rs 40 per photo the  Minister wanted  the tender given to a company that bid Rs 80.  The company concerned would collect  a whopping Rs 672 million on this.  The minister wanted the commissioner General NIC replaced with one of his lackeys.( Island 25.11.16 p 1)

VEHICLE IMPORTS

The Finance Ministry’s attempt to grant special tax concessions for   selected few persons for the import of luxury vehicles has been thwarted, announced the media. The Finance Ministry ordered the granting of tax relief for 26 persons who opened Letters of Credit  in their names on or before 26.05.2016, under the Excise (Special Provisions) Act. This special tax relief seems to have been given to selected individuals and not to all who might fall into the same category of persons who may have opened LCs on or before 26.05.2016. These orders were awaiting parliamentary approval.

The Sectoral Oversight Committee on Public Accounts  asked Parliament not to approve  the order. The country would be deprived tax revenue of Rs. 104 million by granting these tax concessions, officials said. The Committee decided to request the Minister of Finance to make known to Parliament and to the country the background of each of these individuals, since the list contains relatives such as father and son, also  several medical professionals . (Business Times on Sunday 14.5.17 p 1)

NATIONAL PAYMENT PLATFORM

Many an eyebrow has been raised by a government move to set up a hybrid company as part of the controversial National Payment Platform (NPP) to facilitate ‘single button transactions’, said the media. The Cabinet Committee on Economic Management (CCEM) had decided to recommend that the hybrid company be formed with the involvement of the Central Bank and the Information and Communication Technology Agency (ICTA). In 2015, Finance Minister Ravi Karunanayake allocated from the national budget as much as Rs. 25 billion for the National Payment Platform. 

The project however did not get off the ground. There was opposition. This seems to be a  government move to bypass the banking system in clearing retail payments, critics said. There was the danger of a  private company gaining access to all banking information, if  the NPP is allowed to be formed.

Central Bank Governor Indrajit Coomaraswamy wrote to  the Prime Minister  on the matter, in 2018. He said, ‘I would  like to emphasize that in most countries, there exists only one organization for handling the  clearing of retail payments. For example, National Payments Corporation of India (NPCI) is an umbrella organization for all retail payments in the country. It was set up with the guidance and support of the Reserve Bank of India (RBI) and Indian Banks Association (IBA). NPCI currently caters to a 1,324 billion population in India. It is not advisable to have a  hybrid company [for Sri Lanka ]  with a population of only 21 million.

LankaClear (LCPL) which is owned by the Central Bank of Sri Lanka and all Licensed Commercial Banks (LCBs) operating in Sri Lanka handles retail payment and settlement system in   Sri Lanka . Any new proposed payment platform will need to fulfill the criteria of Principles of Financial Market Infrastructure (PFMI), user confidence, security, ease of use and integration with other systems, etc. Further, failing to adhere to the PFMIs will curtail financial and technical assistance from various donor agencies to Sri Lanka and will have an adverse impact on the stability of financial system, market confidence, investor confidence, credit ratings of the country, etc. Considering all the above, CBSL is of the opinion that a new hybrid company is not required and any functions regarding retail payment and settlement systems can be carried out by the existing national payment infrastructure provider, LankaClear.

CENTRAL BANK DEPUTY GOVERNOR

Financial sector meddling was not confined to LankaClear. Finance Minister Ravi Karunanayake had suggested the appointment of an ‘outsider’ as Central Bank Deputy Governor, reported the media.  Traditionally it is a senior bank officer based on seniority and experience. (Business times on Sunday 5.2.17 p 1)

MONEY LAUNDERING

 Finance Minister Ravi Karunanayake had in 2016 asked for a ‘no questions asked’ policy for large scale remittances.  ‘We will ask no questions in fact we will provide measure to make the investor feel safer’, he is quoted as saying. Central Bank and commercial banks opposed this saying that it went against the anti money laundering policy of the banks. Ravi had asked whether they could at least relax stringent control on foreign deposits or remittance below USD one million and maintain the usual checks for anything above.  Banks said they had to follow the local and international laws on the matter.  There are stringent rules on this. (Sunday Times 17.1.16 p 1 ) 

CUSTOMS, INLAND REVENUE, EXCISE DEPARTMENTS

Customs, Inland Revenue and Excise departments were subject to further interference. The Inland Revenue department  complained that revenue collection was going to be handed over to a private company. Excise unions  complained that the power of the Excise department were whittled away by creating a special unit to do the work of the department. Employees of Customs and Inland Revenue departments protested against the deployment of officials of the Finance Ministry units to supervise their duties.

ENERGY

In 2017, the Anti Corruption Front (ACF) stated that the energy situation  had deteriorated since  Yahapalana took over. Those at the helm of the power sector w were taking decisions severely inimical to the national economy. The ACF  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 cited the example of purchasing of coal from Swiss Singapore Overseas Enterprises  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,” .”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,” said ACF.

ACF pointed out that the Yahapalana government  was paving the way for gradual re-launch of diesel power generation facilities at a tremendous cost to the country. ACF charged that the Power and Renewable Energy Ministry was favoring costly diesel power generation and that four top officials who had been directly involved in the  Yahapalana regime change of 2015, 2015 were responsible for ruining the power sector today.

 ACF  urged Yahapalana government to immediately review a series of investment proposals to establish liquefied natural gas (LNG) plants. There  were several energy proposals made to Yahapalana which Yahapalana was ignoring. A 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.

Other offers had also come in. In 2016, BOI received two other project proposals from Indian and Chinese investors. 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 for Hambantota. Cabinet approval as well as Petroleum Resources Development ministry approval were required the Indian project whereas the Chinese project awaited releasing of land in Hambantota.

There was also 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. This should be examined against the backdrop of long overdue approval for foreign investments in the same sector. 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.

There was corruption in the energy sector long before Yahapalana came in , ACF said. A Canadian project had been held up since 2005 pending CEB approval. 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. 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.

 COAL TENDERS 1.NOBLE RESOURCES

A tender  was called for the supply of 6.75 million tonnes of coal over a period of three years to the Norochcholai power plant, a contract worth well over Rs. 60 billion. The Technical Evaluation Committee had originally recommended to the Standing Cabinet Appointed Procurement Committee that Messrs Noble Resources, Singapore was the lowest bidder. Thereafter the Standing Cabinet Appointed Procurements Committee (SCAPC) had received a letter dated 29 June 2015 from Swiss Singapore Ltd. On the same day the SCAPC had directed the Technical Evaluation Committee to re-evaluate the bids ignoring two of the criteria.

The tender    was thereafter awarded to Messrs Swiss Singapore Ltd, by Cabinet overriding a ruling by the Procurements Appeal Board to cancel the tender and call for fresh bids,  after considering an appeal made by Nobel Resources who charged that the tender criteria had been altered after the bids had been opened.

Nobel Resources  then petitioned the Supreme Court stating among other things that Cabinet had not been informed of the material facts of the case and therefore  Cabinet was unable to make an informed decision about this tender. This was perhaps the court case of the year with the list of counsel appearing for the Petitioner and the Respondents reading like a Who’s Who of the legal elite in this country. (Noble Resources International Pte Limited vs Minister of Power and Renewable Energy (SC FR No. 394/2015)

This is a landmark case because the Supreme Court heard it as a matter of national interest. Chief Justice K. Sripavan stated that the court had decided to go into the merits of the case as some of the events that took place in the award of this tender ‘shocks the conscience of the Court’.

The SC observed in delivering their judgment that the Court had granted leave to proceed in this case even though the Additional Solicitor General, appearing on behalf of the government raised the issue that the Petitioner did not have locus standi to invoke the jurisdiction of the Court because the Petitioner is a Company registered in Singapore which has petitioned the SC without a local representative.

The SC observed that ‘it is essential to the maintenance of the rule of law that every organ of the State must act within the limits of its power’ and that ‘the Court cannot close its eyes and allow the actions of the State or the Public Authority go unchecked in its operations’. And further that ‘If the Petitioner with a good case is turned away, merely because he …. has no locus standi to maintain this application, that means that some government agency is left free to violate the law and this is not only contrary to the public interest but also violates the Rule of Law’.

Having considered the facts of the case the Supreme Court  observed that the Government Procurement Guidelines required that bids have to be ‘evaluated strictly according to the criteria and methodology specified in the bidding documents’. The lower granular size limit was among the two criteria removed from the bidding documents so that more powdery coal would be accepted. Messrs Swiss Singapore Ltd was thereupon awarded the tender by the SCAPC.

The Supreme Court observed that ‘no one, neither the State nor the SCAPC shall act contrary to the bid documents and the Government Procurement Guidelines’ and that ‘it is of utmost importance that all the necessary safeguards laid down therein should be complied with fully and strictly and any departure from them make the evaluation process void’ and that ‘if the SCAPC exceeds its authority, the purported exercise of power may be pronounced invalid’.

The Supreme Court stated that the Standing Cabinet Appointed Procurements Committee should have rejected the bid of Swiss Singapore Ltd for influencing the tender procedure. The Supreme Court determination reproduced, in full, a letter written by Maithri Gunaratne the Chairman of Lanka Coal Company (which procures coal for the Norochcholai plant) to the Secretary of the Ministry of Power and Renewable Energy expressing shock that the SCAPC has disregarded the clause in the company’s bid document which strictly prohibits bidders from contacting anybody involved in the award of the tender from the time of the opening of bids to the time the contract is awarded.

The SC stated that the decision made by the SCAPC was outside its jurisdiction and therefore null and void in this judgment. The highest court in the land had struck at the very citadel of executive power by stating that the decision taken by the Cabinet of Ministers on 22 September 2015 to award the contract to Messrs Swiss Singapore Ltd could not be considered a valid decision.

The SC stated further that the power of the State was conferred on the members of the SCAPC and the Procurement Appeals Board to be held in trust for the benefit of the public. The Supreme Court being the protector and guarantor of fundamental rights cannot refuse to entertain an application seeking protection against the infringement of such rights. The Court must regard it as its solemn duty to protect the fundamental rights jealously and vigilantly. It has an important role to play not only preventing or remedying the wrong or illegal exercise of power by the authorities but has a duty to protect the nation in directing it (the executive) to act within the framework of the law and the Constitution.

 Chairman of Lanka Coal Company LCC Maithri Gunaratne  had flayed the  Special Cabinet Appointed Procurement Committee (SCAPC) and  Secretary Batagoda for awarding a coal tender to Swiss Singapore, which is said to have caused a loss of over four billion rupees to Sri Lanka on an earlier occasion. Gunaratne said the LCC should have sought a clarification from the Supreme Court but the Ministry instead sought an opinion from the Attorney General, who recommended that the Cabinet take whatever decision and went ahead with the deal, Gunaratne alleged. 

 A week later, Power and Renewable Energy Minister Ranjith Siyambalapitiya    removed Maithri Gunaratne from the post of Chairman Lanka Coal Company (LCC), reported the media. Gunaratne had been targeted for speaking out against those involved in mega corruption said CaFFe. In March 2017, Joint Opposition lodged a complaint with CIABOC and the Criminal Investigations Department (CID) against Ranil Wickremasinghe, Malik Samarawickrema, R. Paskaralingam and Charitha Ratwatte over the Swiss Singapore coal deal.

COAL TENDERS  2

The Secretary to Ministry of power and renewable energy, Dr R.M.S.Batagoda  wrote  a strong letter to the CEB chairman  in 2016 on a number of irregularities in the CEB. The coal tender for Lakvijaya coal power plant has been riddled with irregularities and this has led to losses to CEB. The tenders are handled by the Lanka Coal Company which lacks the competence to do this. This tender should be handled directly by the CEB.

The LCC was soundly criticized. The LCC seems unable to get the suppliers to stick to regulations set out in the signed agreement or do the payments in a lawful manner. In several instances the tender documents has been altered to suit the supplier after the tender had been awarded.

 Further, Nobel resources contracted to supply 1.9 million metric tons in 2015 had only supplied 1.6 million. The loss to Sri Lanka is estimated at 12,500 million. However LCC had defended the supplier saying they could not supply the balance due to the monsoons. The supplier should not  be able to get away with such a flimsy excuse.  The matter should have come before a bigger committee. CEB had to bear the loss.

Batagoda also drew attention to Liberty Commodities.  Liberty  was awarded  a tender to supply 165 metric tons of coal  in May 2015, by a cabinet appointed procurement committee. The sulphur and ash content of coal  had been altered to Liberty’s benefit after the tender had been awarded to it.  This is illegal.  It is also a financial crime. But CEB kept quiet and paid huge sums of money to the tenderer.

 Liberty was awarded the tender again in  September 2015 and the price was altered by the LCC. The contract signed by the LCC was not the one approved by the Tender board but what LCC had passed off as an amendment to a previous tender. That is another illegal act. In January 2016 LCC  again altered the tender  document to benefit Liberty and caused losses to the CEB.

The next tender  was awarded to Adani Global. The  supplier failed to supply 113 metric tons of the contracted 260 metric tons causing heavy losses to CEB.  5 out of 6 tenders awarded by the LCC last year had been full of controversy Batagoda concluded.

Batagoda found fault with the  LCC Board of directors for not taking remedial measures and tangible action to avert losses.  Batagoda asked whether the LCC was needed at all. According to the Attorney General’s report  the LCC wasn’t essential for the purchase of coal. LCC’s future should be examined against the backdrop of its failure to take remedial measures as recommended by the AG.  

SRI LANKA – SINGAPORE FREE TRADE AGREEMENT (Business Times on Sunday 20.1.19)

The Sri Lanka – Singapore Free Trade Agreement (SLSFTA) has run into troubled waters following the startling revelations made by the 5-member Presidential Committee of Experts (CoE)) in their 280-page report. President Maithripala Sirisena has called for the suspension of the agreement pending its revision or abolition, as protests by professional associations, public interest groups and stakeholders of international trade over the SLSFTA grows to a boiling point.

The President’s directive comes at a time when the SLSFTA’s validity under the Constitution is being challenged at the Supreme Court by eight petitioners claiming that several professionals including doctors, engineers and lawyers would be affected due to this pact. Prime Minister Ranil Wickremesinghe, the cabinet of ministers and the Attorney General have been cited as respondents in the case.

After these mounting pressures exerted from all fronts especially from the Presidential level, a team of international trade experts is now scrutinising the observations and recommendations contained in the CoE report,. The ministry will submit counter submissions relating to adverse observations contained in the report .however  they are not aware of any directive of the President calling for the suspension of the agreement.

The CoE was of the view that the entire negotiation process was carried out without any feasibility and cost-benefit studies from Sri Lanka’s point of view. It observed that some serious lapses were allowed to occur,  deliberately or inadvertently to expedite matters in the process of signing the SLSFTA by Minister Malik Samarawickrema.The Minister had indeed acted without attending to the conditions laid down by the Cabinet of Ministers in its conditional approval granted to him, the report said. These lapses relate to non-compliance with matters which the Cabinet had clearly indicated had to be fulfilled before signing,said CoE ,while making several other startling revelations.

LAYARDS ROAD DEVELOPMENT (Sunday Times 4.3.18)

The Megapolis Minister has issued a gazette notification, permitting mixed development on the eastern side of Layards Road in Colombo 5, including a section which is at the centre of a legal dispute between a condominium builder and several residents.

The proposed ‘Blue Ocean Layards Road’ is advertised online by the developer as a luxury apartment complex of 14 storeys. But in June 2017, eleven residents of Layards Road filed a petition seeking to quash any preliminary planning clearance issued to Blue Ocean Breeze (Pvt) Ltd or D D Enterprises (Pvt) Ltd by the Urban Development Authority (UDA) or the Colombo Municipality to erect a building of more than five floors

.The basis of the legal challenge was that the plot on which Blue Ocean was putting up the highrise is a ‘Special Primary Residential Zone’ under the 2008 City of Colombo Development Plan (Amendment). The number of storeys allowed within such an area is five or ground plus four floors.

In January this year, the residents once again petitioned the Court of Appeal for an interim order to prevent the developers from starting construction after learning that work was to begin soon. They sought a writ of prohibition to prevent the UDA or the municipality from issuing a fresh preliminary planning clearance or building permit for a construction exceeding five floors. They also want a writ of mandamus compelling the UDA or the municipality to demolish an unauthorised construction” should the developers proceed with the project, especially if it exceeds five floors.

But in a gazette dated January 18, 2018, Minister Champika Ranawaka (who also holds the portfolio of Western Development) has designated the front lots along the eastern side of Layards Road to be a ‘Mixed Development Zone’. This allows for the construction of offices, apartments, entertainment facilities and shops. The Minister’s signature on the gazette is dated July 14, 2017, not long after the residents took the matter to court.The gazette gives effect to a revision of the City of Colombo Development Plan.

 The Urban Development Authority Law empowers the Minister to carry out periodic changes. The amendment now allows Blue Ocean to proceed with its project.The UDA rejected any suggestion that the amendment was introduced to favour a particular developer. But Chairman admitted that Blue Ocean made a request to implement the project in the Special Primary Residential Zone.

The developer pointed out that one side [western] of Layards Road is designated a Mixed Development Zone while the other side [eastern] is a Special Primary Residential Zone,”  he said. The street is the boundary between the two and separate regulations apply to each side. However, the land value on both road-fronts is the same.” The decision was not in favour of anyone,”

The UDA followed a procedure. The Act clearly prescribes how any changes to the Plan must be carried out. There may be certain development needs arising from time to time. These are referred to the Planning Committee appointed by the Minister and they make the decisions.” The Committee, on policy grounds, ruled favourably on the developer’s request, adding that the change applies to all the lots facing Layards Road. This means other companies can now erect buildings on either side of the street.The Committee’s outcome was referred to the Minister for validation through a gazette. The date of his signature was only a coincidence”,. And the gazette was only issued in January because it had been lying in files” at the UDA (Continued)

One Response to “YAHAPALANA AND CORRUPTION Part 2A.”

  1. A Concerned Citizen Says:

    The entire thing is so corrupt that there are not words for it. They treat the people with contempt! I cannot see why every citizen should not have the same rules. Why should politicians, or cronies, or certain vested interests get tax free permits for vehicles etc?

    The coal tender is like reading about some evil villains in a novel. The problem is it all starts from the top. Honest people within the system are blocked it seems. I liken the country to Gotham – most of the political class and infrastructure are in bed with the criminal fraternity. Thus you need an elite team to clean the place up.

    I also saw a programme about Maithri Gunaratne trying to fight these guys. He would make a far more honest leader, along the likes of Nagananda Kodituwakku, Malinda Seneviratne, Krishmal Weerasuriya – all of whom are fighting corruption genuinely.

    People need to have the will to not tolerate all this corruption. There are statistics to say the country has borrowed something like $11 billion yet only $1 billion has actually been spent (and that inefficiently). Where is the rest? I weep for Ceylon/Sri Lanka. There is so much potential, but we are recycling a bunch of buffoons over and over again to lead us on a path to nowhere. 10 years after the war ended, we should have been so much further ahead!

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