The Sunday Leader

Taurian Iro Held On To Funds For 4 Months

  • USD 8.8 million coal exchanged for poor quality

By Faraz Shauketaly

A disastrous piece of strategy ostensibly designed to save Lanka Coal and the Ceylon Electricity Board (CEB) from a potential loss running into several millions of dollars, has now boomeranged causing the Lanka Coal Company and the CEB to resort to completely unheard of practices.  At an emergency meeting of Lanka Coal and its partners, Ceylon Shipping, Ceylon Electricity Board and the Sri Lanka Ports Authority held last Monday, stop-gap measures were rushed in to stem the growing controversy with regard to the arrival of substandard coal to Sri Lanka.
For the past fortnight The Sunday Leader has highlighted a growing controversy in the importation of Coal for the Norochcholai 300 MW power station. In the first article we highlighted that substandard coal was on its way to Sri Lanka, complete with an authenticated Certification of Analysis from an Indonesian company whose certificate is relied on by the government of Indonesia to calculate royalties due from the mining company.
We alerted the public and those in authority that not everything was ‘right’. Indeed events this past week have proven The Sunday Leader to have been accurate. In a response received from the Chairman Lanka Coal, the events described by The Sunday Leader have been acknowledged. The responsedenies attempt of any fraud but leaves many questions unanswered and unexplained. The response further exposes what appears to be a loose arrangement entered into in order to stem possible large losses in connection with the consignment of coal that was not discharged.
SGS the company that carried out the testing of the latest two consignments of coal in Sri Lanka have also found that the coal is of decidedly lower quality than the Lanka Coal specifications. Clearly the integrity of the certificate given by Geo Chem for precisely the same cargo has to be questioned. We publish exclusively the SGS report on the quality of the coal that has arrived in Sri Lanka. More to the point the actions of the supplier Taurian must be investigated fully. Whilst the Chairman of Lanka Coal politely states that there was a “discrepancy” he refers only to two Certificates without stating which companies are involved. The lack of transparency in addressing the existence of three Certificates of Sampling and Analysis almost beggars belief.
In the interests of transparency and to ensure that the actions of Lanka Coal and Ceylon Shipping are seen to be above board and beyond speculation and innuendo both organizations must demonstrate their intentions in an open and transparent manner. Our questions posed to Lanka Coal have met with a response that does not address the issues at hand.
‘Certificate One’ was issued by Sucofindo of Indonesia at the load port. On the basis of that Certificate the consignment was not up to the mark as required by Lanka Coal for the Ceylon Electricity Board (CEB). Why did Lanka Coal not reject the shipment at the load port? ‘Certificate Two’ purports to be issued after testing samples at the load port by Geo-Chem and sent by electronic mail. However there are significant variations in the quality of the coal but – no surprises here – the consignment is in keeping within the Lanka Coal / CEB specifications.
‘Certificate Three’ was issued after the testing was carried out by SGS the Swiss-based company of international repute. The Swiss-based company made its findings known and the results show that the coal delivered to Colombo is substandard – that is to say not keeping in line with the requirements for Sri Lanka.
The Chairman Lanka Coal, Tissa Herath states that the CEB as the ultimate buyer (the question that begs answering is why set up a company called Lanka Coal, if all they are doing is being a virtual ‘sub-post office’ for the CEB and Ceylon Shipping Corporation (CSCL) will be carrying out independent tests because ‘of a discrepancy’ in the analysis. Herath’s response does not acknowledge the existence of three – not two – Certificates of Sampling and Analysis. More significantly there has been no explanation as to why there was a need to obtain a sampling certificate from Geo Chem when Sucofindo had already issued a Certificate at the load port. Can a reasonable, liberal minded person be faulted to even momentarily consider that something is rather a miss as opposed to above-board?
Herath points out that as no ‘monitory mechanism has been initiated as yet, no financial loss has been incurred by LCC or CEB.”. This statement must qualify for the best attempt at ‘pulling the wool over…’ The consignment from Noble was paid for. The Noble contract was on a FOB basis which means that payment in full was routinely made. The amount paid to Noble was approx USD 8.9 Million (Rs.  1,116,000,000). By Herath’s own admission, ‘no monitory arrangements were in place’ – which in essence means that in connivance with Ceylon Shipping Corporation, the entire shipment worth USD 8.9 Million was handed over to Taurian for no monetary consideration.
Reliable sources however insist that Ceylon Shipping and or Lanka Coal did in fact receive a credit note from Taurian. The effect of this is plain: Taurian took the perfectly acceptable coal of around 85,000 MT away from Lanka Coal and as a replacement sent coal that was below the quality required by Lanka Coal. Now that it is established that there is a ‘discrepancy’ all Lanka Coal with Ceylon Shipping will have is a consignment of coal that has been established to be below specification by two separate sampling and analysis companies. A loss, by any stretch of imagination to the Republic of Sri Lanka of more than USD 8.9 Million.
Chairman CSCL Kanchana Ratwatte, in his response stated that Board Meetings were held to discuss this matter along with Lanka Coal and CEB. He also stated that the ‘relevant Ministries were informed’. Ratwatte also claims that seven other companies including the tender-winning Noble were approached for a solution to the problem of the near-distressed cargo. Our sources reveal that one company was not approached at all and that the supplier had introduced CSCL and Lanka Coal to a third party user in India who may have been willing to purchase the coal stranded without being discharged.
The available information indicates that CSCL did not pursue the matter and instead awarded the contract to Taurian with the now attendant disastrous results. In a related development, emissaries claiming to represent Geo Chem Laboratories India approached The Sunday Leader on Friday to claim that their company was not involved in the testing and sampling process for Lanka Coal in Indonesia. Both emissaries promised that they would supply documentation verifying their claim by ‘next week’.

(faraz@thesundayleader.lk)

Questions submitted by The Sunday Leader to Kanchana Ratwatte, Chairman Ceylon Shipping Corporation (CSCL): We are in receipt of a response from Lanka Coal under the hand of its Chairman, sent to us by the Ministry of Power and Energy. It appears that CSCL had rather more to do with these consignments than was previously evident.
The CSCL were entrusted with the “sale/re-export” of the cargo which in April-May 2012 was unable to be discharged due to inclement weather. To mitigate the additional costs involved in the sale/re-export of the cargo, CSCL was given an order to supply 5 consignments of coal as well as the need to replace the cargo that was the subject of the ‘sale/re-export”.
Would you be able to comment on:-

a)   Exactly what basis CSCL awarded this contract to (1) Taurian (2) and or any supplier, (3) were there offers asked of other suppliers?
b)  Now that the coal has got three different Certificates of Sampling and Analysis (Sucofindo, Geo Chem and SGS) what are your instructions from Lanka Coal to address this issue in light of the fact that Lanka Coal stated that CSCL was entrusted with the ‘sale/re-export’ and its subsequent replacement?
c)  Did you discuss this with members of your CSCL Board prior to embarking on arranging the ‘sale/re-export’ of the consignment, or in your role as Chairman, are you able to make these decisions without reference to the members of your Board, the Ministry Secretary, the Cabinet of Members, a TEC etc., etc.?

Responses from Kanchana Ratwatte, Chairman CSCL:

1.    At the inception I wish to reiterate that CSCL is not the transport contractor for these shipments which was your query raised in your email.
2.    We requested proposals from about 7 parties including the supplier Noble, and also Freight partner Mercator for which we received only one response from Taurian …
3.    Board approval of CSCL and LCC were obtained as well as the relevant Ministries were informed.

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Response From Lanka Coal

We refer to the two articles written by Faraz, appeared in the Sunday Leader on 11th and 18th November, 2012 pertaining to import of coal by Lanka Coal Company Pvt. Ltd. (LCC). The LCC is a fully government owned company of which 60 percent shares are held by the Ceylon Electricity Board, 20 percent by the Treasury, 10 percent each by the Ceylon Shipping Corporation Ltd. and the Sri Lanka Ports Authority.
In April – May 2012, due to inclement weather conditions that prevailed, it was found impossible to unload two shipments of coal that were available in the harbour and therefore, a decision was taken to re-export the consignment. Thereafter, the Ceylon Shipping Corporation Ltd (CSC), a shareholder of LCC and the Lightering and Shipping contractor of LCC, undertook the exercise of sale/re-export of the available quantity amounting to 85,891 MT., on conditions that the same quantity and of the same standard be supplied after the monsoon in October, at no additional cost. Further, to mitigate the additional cost involved in sale /re-export, it was agreed that CSC will supply five shiploads of coal, inclusive of the re-exported quantity.
Accordingly, the CSC commenced shipping in October and the first consignment of 55,994 MT was shipped on board MV Prabhu Parvati. In terms and conditions of the agreement between LCC and CSC and also in adherence to international practice, coal is tested at the ports of loading and discharging and lord port certificates are sent via electronic mail within five working days, after the completion of loading. Similarly, discharge port certificates are also made available within seven working days, after the completion of unloading at the Puttalam jetty.
As regards the shipment of 55,994 MT of coal on Prabhu Parvati, a discrepancy between two results was found. When such a discrepancy is found, there is provision in the agreement to get the reference samples kept in sealed and airtight containers, at the port of loading and discharge tested by an independent testing authority nominated by the buyer. It is now decided to test the reference samples by an independent testing authority, nominated by the Ceylon Electricity Board, who is going to be the final buyer. Further shipment of coal by this supplier has been put on hold until the results of these tests are made available. As no monitory mechanism has been initiated as yet, no financial loss has been incurred by LCC or CEB. After the verifying the quality of coal, the payments will be made and it has been decided by the Board of LCC to restrict this contract only to three shipments, where one shipment is carrying deaf coal (not thermal coal) to Puttlam. In view of the above facts, please note that no attempt has been made to defraud the LCC by anyparty.

Chairman
Lanka Coal Company

8 Comments for “Taurian Iro Held On To Funds For 4 Months”

  1. Reality

    It is a fact that Lanka Coal Pvt Ltd floated the Tender calling for the supply of coal for the Norochcholai Power Plant and not the CEB.
    Now we have Lanka Coal Pvt Ltd handing over appox 85,891 Tonnes of specification coal to a third party and getting in return substandard coal. The school boy’s question is who pocketed the difference in value.
    Further if the tender-winning company “Noble” has failed to deliver the coal as required by the tender specifications/conditions, has Lanka Coal Pvt Ltd encashed the Performance Bond of the defaulter. Mind you these are all state funds been played around with.
    An another million dollar question is, how can Ceylon Shipping who is a part owner of Lanka Coal namely the client, be a Tender participant too. Looks more like the Client getting in to bed with the Contractor!

  2. Janapriya Silva

    Ranawka where is the JHU principals?

  3. Thissara Herath

    Why is Noble not supplying Coal when they have been suppliers earlier to LCC? All of sudden Taurian, a new company given a chance to supply to LCC without any background check, seems to be a clear case of favouritism

  4. Padma

    The supplier should clearly be blacklisted for cheating LCC with lower quality coal.

  5. How can LCC and CSC allow a company to supply substandard coal when LCC is paying agreed price for the agreed quality.This company should be banned immediately and blacklisted for future supplies also.

  6. Surya

    Shocking to say the least. This is a big fraud.

  7. Surya

    Known Devil is better than an Unknown Angel! Better to go always for a trusted name.

  8. Parthasarthi Nair

    Corruption is the cancer of new world which is taking sri lanka into its grip after LTTE….. Surprisingly official are unable to verify the claims made by Sunday leader !!!!!!! A fair investigation should be setup to punish the culprits and the best company should be given the opportunity for the growth of this developing nation.

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