The Sunday Leader

Why Sathosa Stocks Are Going To The Dogs

  • Corruption and mismanagement in rice importation leaves the state losing billions

by Hafsa Sabry

Court recently ordered Lanka Sathosa to sell 70,000 metric tons of rice stock declared unsuitable for human consumption to major companies as animal feed. The rice stock was imported by the Ministry of Industry and Commerce during the former Rajapaksa regime contrary to an approved cabinet paper.

The rice stock was ordered to be sold to major companies as animal feed in the belief that smaller companies would sell it to consumers. Based on the cabinet paper decision Lanka Sathosa had agreed to sell it to five major animal feed companies including Prima, Gold Coins and CIC. The cabinet paper mentioned that 1kg of rice stock from Sathosa should be sold at 38LKR.

Corporation and Statuary Board Division Director at the Ministry of Industry and Commerce Indika Ranatunga said the stock will be sold to the companies based on their production capacity as Prima produces 10,000-15,000 MT while the other companies produce around 5,000-10,000 MT. Only five companies were selected out of 11 main animal feed companies in the country.

Rice stocks found at a Veyangoda warehouse which were unsuitable for human consumption

Two committees of the cabinet including the Committee of Economic Management chaired by Prime-Minister Ranil Wickremesinghe and the Committee of Cost of Living chaired by Malik Samarawickrama had based their decision on the suggestion made by Public Health Inspectors (PHIs) and the judges decided to sell the stock as animal feed.

During the last regime the Ministry of Industry and Commerce according to an agreement with the government of Bangladesh in December 2014, imported 260,000 MT of ‘nadu’ rice during the first week of January 2015 for the domestic market. The 260,000 MT rice volumes were officially guaranteed to be consumable and fit for consumption till January 2017.

The stock after being imported was stored at several Sathosa warehouses which following a sudden raid by the PHIs in 2015, wassealed on a claim they were unhealthy for human consumption.  The previous stock distributed to the local market went unchecked while samples of the sealed stock were sent to the veterinary research institute in Peradeniya where it was confirmed as being unsafe for human consumption.

However, the ministry claimed that the PHIs sent the samples only after four months of sealing the warehouses of Lanka Sathosa and if not, the stock could have been distributed without any issue as the rice was well checked before importation.

The ministry also claimed that they imported 260,000 MT of rice in 2014 and all quantities of rice stock except for 70,000 MT were sold through the outlets of Lanka Sathosa till the PHIs sealed more than 10 warehouses in Bollegala, Kelaniya, Pethiyagoda, Mabima, Veyangoda, Meethotamulla and Colombo.

“Rice distributed to consumers have not posed issues in the past,” Ranatunga said. However, a visit to the Colombo Port by officers of the Presidential Commission of Inquiry into Large Scale Acts of Fraud and Corruption (PRECIFAC) recently exposed certain incidents that had taken place at Lanka Sathosa. The visit had revealed that nearly 100,000 MT of rice was stored carelessly causing losses amounting to millions of rupees to the government.

During the probe on the alleged racket on rice importation, the Commission officials had found that rice stocks stored at Veyangoda were unsuitable for human consumption as they were rotten and had been stored at the Colombo Port and unsuitable warehouses for a long period without proper management.

Lanka Sathosa had received approval to import only 60,000 MT of rice, but the authority with no consideration to the approval and the cabinet paper had imported 260,000 MT of ‘Ponni’ and ‘Nadu’ rice. “Now destroying the rotten stockhas caused another loss,” said former PRECIFAC Secretary, Lacille de Silva.

In addition to the violation of the clauses in the cabinet paper, the stock of rice was imported in violation of government tender procedures. Without adhering to proper procedure, the tender was awarded to ACD Enterprises India as a special supplier. Reports also revealed that after getting port clearance, some of the stocks of rice were stored in a private warehouse belonging to Liverpool Navigation Ltd, and not at the Lanka Sathosa warehouses while, 99 per cent of the transportation was also carried out by the same private sector entity in violation of tender procedure. Rs. 15 billion had been paid for transportation by Lanka Sathosa to the private sector. Meanwhile, the former PRECIFAC Secretary claimed that a large amount of public money is allegedly being wasted by Lanka Sathosa officials. Some management officials had already been transferred and removed from top positions and some others allegedly involved in corruption will also be discharged without delay.

However questions still remain unanswered as to how a huge stock of rice had been imported into the country without proper planning by the Sathosa authorities. The Commission is also investigating whether large sums of money had been obtained in the form of commissions.

“This is a waste of public funds,” De Silva said adding that the wrongdoers would be punished irrespective of their political affiliations and whether they were in the current or former regime. It was revealed that one of the state institutions that deals with public funds had allegedly used Rs. 15 billion in violation of cabinet papers.

When the authorities were questioned over the irregularities and the alleged misuse of public funds, they refused to respond, but tried to engage in a blame game.

Nevertheless, the letter of credit issued during the final stages of the Rajapaksa regime to import 100,000 MT expired and was made valid by the present government on February 25, 2015. About 800 container-loads that had been imported without basis had remained at the Colombo Port for nine months, from February 29, 2015 to January 2016. By the time the rice was cleared, the entire consignment had become unfit for consumption.

However, Indika Ranatunga said that this issue had been discussed a number of times in the media and several committee discussions had been held and the issue will be solved soon after the stock was sold as animal feed to the selected companies.

In the meantime, even though it was declared by the area PHIs that 50 per cent of the rice stock was not fit for human consumption, 10 per cent of it has now become unsafe for animal feed as well, internal sources claimed.


2 Comments for “Why Sathosa Stocks Are Going To The Dogs”

  1. From the decision to order the rice and right down to the storage, there has been a series of corruption and fraud at every stage. Lak Sathosa and even the days of the CWE has been ridden with bribery, corruption and fraud mostly due to political interference and appointment of stooges over the years., Finally, the loss and other issues of similar manner in almost every state management and entities , have to be born by the masses through taxes.

  2. Kaputa

    What happens to those who ordered these stocks?. I guess! If they are still in employment give them a better posting,well that’s MR’s way of doing things and hence why not Hon.PM Ranil too! Or is it like the Coal Deal gone Cold these days?

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