KAMALIKA PIERIS
This essay presents, as an annexure, several projects which have been commented on, during the ‘Yahapalana wake up call’. Critics are using Yahapalana rule to give vent to certain economic resentments.
Samantha Kumarasinghe of Nature’s Secrets stated that an agreement was entered into in the 1980s with a Singaporean Company to mill wheat imported into Sri Lanka for 30 years on a ‘build operate and transfer’ basis but that in 2001, the President sold the business that was to come into the hands of the government in 2007, for 60 million USD. (I think he is referring to Prima.) The turnover of that enterprise since then had been well in excess of eight billion USD. Abuses like this happened due to the lack of a national policy on trade and investment, he said.
Kumarasinghe said that likewise fuel distribution rights were given to an Indian company for 75 million USD simply to import fuel and to distribute it without even refining it in Sri Lanka. He is speaking of Lanka IOC.
The UNP government of 2001—2004 sold a part of the petroleum retailing business to the Indian Oil Company in 2002, giving the advantage to India and not Sri Lanka, said the Joint Opposition of Parliament in 2016. The state owned Indian Oil Corporation is a Fortune 500 company and is India’s largest oil company. For a paltry amount of money the Lanka Indian Oil Company was given the right to import and distribute fuel in Sri Lanka and repatriate profits, complained critics. Only USD 40 million has come in, though 70 million was promised. IOC was selected by a cabinet paper without any competitive bidding. This ended the Ceylon Petroleum Corporation’s petroleum monopoly.
Lanka IOC obtained about 25% of the petroleum distribution and 33 % of the Petroleum storage terminal Ltd, which contained the CPC pipeline network. LIOC now owns 189 filling stations in the country and is now making huge profits. Sales from 2002-2013 is approx USD 3.6 billion. There was absolutely nothing in terms of technology transfer or employment generation that Sri Lanka got from this ‘foreign investment’. All that has happened is that profits that would have gone to the CPC is now going to the LIOC instead, said critics.
Lanka IOC says it had helped improve the petroleum service. When we invested in Sri Lanka, fuel was pumped in petrol sheds which were dilapidated and we introduced petrol stations which offered multiple services. This changed the entire concept of petrol pumping business. We are happy that our ‘brother’ Ceylon Petroleum Corporation too followed us and today Sri Lanka has fuel stations of international level.
Lanka IOC stated in 2018 that the retail fuel business was no longer profitable, and they have gone for lubricants. We have now moved up to the number two position in Sri Lanka’s lubricant market.” We observed how Sri Lankan consumers changed their vehicles and purchased the latest models in the international market. This gave us the opportunity to introduce several new Petro Chemicals and new types of fuel to the local market which has become very popular in the island.
The Sapugaskanda Oil Refinery Expansion Project came naturally under discussion, thereafter. The oil industry makes up a huge percentage of the country’s economy, therefore investments in the sole petroleum refinery of the country are important, reported Ceylon Today in 2016. The trade unions and CPC engineers drew attention to the need to immediately modernize the petroleum refinery in Sapugaskanda. This refinery, built in 1969 has helped Sri Lanka save a massive amount of foreign exchange and has contributed a large amount of revenue to the state, they said.
Sapugaskanda Refinery Expansion project is a very important investment for the future, said Ceylon Today. The new refinery must be vested solely in the CPC. The capacity of the Sapugaskanda refinery must be increased to between 100,000 to 150,000 barrels, from its current production capacity of 50,000 barrels per day. Fuel refined in Sapugaskanda can be stored in the Trincomalee oil tank farm. Additional profits can be made from bunkering.
The estimate for the Sapugaskanda Refinery Expansion project is 1.8 billion US dollars. ‘We can do it,’ said CPC Chairman. ‘We can pay back that amount within five years .We can earn a profit of 350 to 400 million US dollars annually after modernization.’ Several countries had been keen to collaborate in this venture PFN Iran, an Iranian company made the best offer. It was a highly attractive offer with very favorable terms. The loan is interest free, repayable in 20 years. The only condition PFN Iran stipulated was that the CPC buys all of its crude oil requirements from Iran for 20 years. Iran has been one of the major crude oil suppliers to the CPC for many years.
The offer has been on the table since last July, said informants, in December 2016. However, the Cabinet had handed the matter over to the National Economic Council set up by Prime Minister Ranil Wickremasinghe. which in turn had appointed a high powered committee comprising the Governor of the Central Bank of Sri Lanka, Secretaries to the Ministries of Finance and Petroleum and Petroleum Gas, President’s economic affairs adviser Sarath Rajapatirana and W.P.B. Weragoda of the Ministry of Finance to submit recommendations,
Ceylon Today reported that vested interests, including ministers, were obstructing the PFN Iran proposal. They opposed the proposal from Iran saying it is that it is difficult to deal with Iran due to US economic sanctions. But US sanctions on Iran have been revoked, observed Ceylon Today. The Yahapalana government is letting the oil refinery die a natural death instead of upgrading it from its current production capacity of 50,000 barrels per day, reported the media in November 2017.
During the discussion on Sapugaskanda, another issue came up. ‘.Unqualified people were appointed to important departments to handle fuel procurement and storage,’ said an energy expert who worked for three decades at the Sapugaskanda Oil Refinery. These positions are filled by political cronies who have no knowledge or expertise in petroleum. They often find themselves out of their depth when a crisis occurs.’
The September 2017 crisis is a clear indication that the CPC’s senior management had no proper knowledge of the oil market,” he stressed. When we have a fuel crisis such as the one in September, we need a qualified team of experts to manage the crisis. They could have floated spot tenders and obtained petrol from suppliers in places like Singapore or nearby countries. But that can’t be done without a proper knowledge of the subject, he concluded.”
Attention next moved to the Trincomalee oil tank farm. The Petroleum trade unions used the Yahapalana wake up call, to air their pent up resentment about the Trincomalee oil tank farm. The CPC trade unions urged the government to take over the Trincomalee Tank Farm at China Bay. This is our fount of wealth, they said. They blamed successive Sri Lankan regimes for failing to put the Trincomalee tank farm to good use.
Apologists explained that Ceylon Petroleum Corporation had found in 2003 that it could not repair the Trincomalee oil tank farm. Indian companies expressed their willingness to do that. If Indian companies had not agreed, the country would have found some other international companies for the task, said the apologists. This was brushed aside.
Developing 100 tanks and clearing the 850 Acres of land and pipe line and the Oil Jetty in Trincomalee harbour should be done by Sri Lanka government, said Captain Ranjith Weerasinghe. It does not cost a lot to upgrade the tanks and clear the land. If the government cannot afford even that kind of investment, there are enough local companies who can do that and run the tank farm so that there is no need to give it to foreign countries.
Trincomalee harbour, tanks and land are already ours, without a cent of debt to any one, continued Weerasinghe. Why invite another country like India to jointly develop it. Why should Trincomalee tanks be jointly developed with India or any other country? Trincomalee Tank farm with 100 tanks in 850 acres of land need not be given to any country or any foreign company. Sri Lanka can earn huge revenue from its oil tanks alone., why sell to India? We must make full use of our own asset for the country’s benefit, said Weerasinghe.
Get the LIOC out first and take possession of all 102 tanks, the pipeline & oil jetty and land, vested clearly in the Government, Weerasinghe urged. There are viable alternatives either as a sole government project or local private public partnership project. There is ready business available Business that can be developed to attract other oil traders in the region without having to give out on lease agreements.
Tanks can be hired out on a daily rate “per CBM per day”, for storage for anyone who wants to hire them for crude oil, heavy fuel oil, intermediate fuel oil, refined products such as diesel, petrol, kerosene, aviation fuel , using dedicated tanks and separate pipelines to the jetty. Foreign companies can use the tanks for short term and long term storage of petroleum oil, so that there is no question of long term leasing it out to anybody. Tanks can also be hired “per MT per day” basis and can earn 100 times more than what the current lease with India gives. Even if we don’t have any business for these tanks, let them be as they are. Why you want to give it to another country, concluded Weerasinghe.
Attention then turned to Ports and Shipping. At a CASA seminar in 2018 Capt. Ranjith Weerasinghe highlighted three landmark events in maritime history of Sri Lanka. They were, embarking on state owned ship ownership and operation through the establishment of the Ceylon Shipping Corporation in 1971, facilitating Sri Lankan ship operations internationally through the enactment of the Merchant Shipping Act, and forming Sri Lanka Ports Authority. Admiral Jayanath Colombage said he said that the two ships bought by Ceylon Shipping Corporation Limited (1992) had full time business and was training close to 50 Sri Lankan seafarers.
However, the Merchant Shipping Act and the Sri Lanka Ports Authority has not undergone the necessary changes thereafter. In addition, the SLPA needed to convert to a more commercial entity. SLPA cannot be the landlord, terminal operator and regulator at the same time,”Capt. Weerasinghe recommended a totally new parliamentary enactment to encompass the entire shipping, maritime and logistics activities, set within a maritime development project which should be promoted, facilitated, and regulated by an apex body named Sri Lanka Maritime Authority.
There was considerable discussion on the status of the ports of Sri Lanka. These ports were a national asset. Due to Sri Lanka’s geographic location, there is massive potential, in its ports said analysts. Sri Lanka ports can be used for wide range of services. Therefore, Sri Lanka needs a national policy on port development and port management, said specialists speaking at an OPA (Organisation of Professional Associations) seminar on the subject.
The Yahapalana government and the Ports Authority engineers have opposing views on developing ports. Engineers Association of Sri Lanka Ports Authority (EASLPA) said in 2017 that Hambantota port and the proposed industrial zone and the East Container Terminal (ECT) of the Colombo port, are money spinning assets owned by the SLPA but the government is trying to sell them. The SLPA can work the Hambantota port and the ECT, said the SLPA chairman, Ranatunga adding I’m confident. I have done business around the world. The EASLPA and the port trade unions said they have a systematic plan that could be used to make the Colombo Port into a profitable organization without going for privatization.
ECT is the only terminal which has a depth of 18 meters and can handle mega-vessels carrying over 12,000 twenty-foot equivalent units (TEUs). It is a deep water terminal to which deep draughts ships can enter. Engineers Association of Sri Lanka Ports Authority EASLPA, claim the terminal could be easily turned into a profitable one with just about US$ 70 million investments on machinery. Once the machinery is installed, the terminal would make a huge profit. It has been estimated that the process of installing the machinery, including the importing of them, would take around 11 months. From the 12th month on wards, the terminal would make profits. It was planned to have the equipment ready at the ECT terminal and commence work by March 2017.
SLPA had submitted two cabinet papers on ECT. Private local banks had offered to provide the funding but the government was not interested in either. Cabinet Committee on Economic Management (CCEM) ‘has complicated things by introducing conditions to suit a single port operator.’ Yahapalana government is working with foreign private investors on the commercial development of Sri Lanka‘s sea ports. Yahapalana government thinks that unless the terminal is privatized this cannot be operated efficiently, said critics.
It is alleged that Sri Lanka is going to give the fifth container terminal at Colombo port, the Eastern terminal, to India. It is to be sold by auction, without considering the agitation of harbor employees. The Eastern terminal is the only part of the port that is still owned by Sri Lanka. The other terminals were sold or privatized. But the maintenance or roads, providing infrastructure facilities such as electricity and water providing security maintenance are all performed by the Ports authority for the private companies which have got hold of the terminals, observed critics.
The port employees set up a Ports Protection Union Front (PPUF) in 2017, against the sale of the Eastern Terminal to a foreign company,” The All Ceylon Port General Employees’ Union said the Ports Authority earned a considerable revenue today The Eastern Terminal was the biggest terminal of the Colombo Port. Selling it to a foreign company would decrease the revenue and put the jobs of its employees at risk. The government should hold the major share in the Eastern Container Terminal.
The engineers warned that SLPA would lose all business within a matter of five years if the government gave ECT to a private party because such action will risk SLPA losing the shipping lines that currently uses its terminals. Therefore what is required is to turn the ECT into a terminal which handles bulk cargo for larger vessels under SLPA by procuring the required machinery and equipment,” the EASLPA said. ( CONCLUDED)
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