The Sunday Leader

Court Order On Coal Deal Disrespected

by Nirmala Kannangara

  • When the LCC could procure coal for a much lesser price through spot tenders, what was the reason for them to go ahead with an agreement which the Supreme Court and the PAB wanted to cancel?
  • If the AG’s Department can supersede SC decisions then there is no need to have a court system in this country
  • Tenders were called from prospective bidders in April 2015

Norochcholai Coal Power Plant

The Ministry of Power and Renewable Energy and Lanka Coal Company have been accused of contempt of court for disrespecting a Supreme Court directive delivered on June 24, 2016.

Despite of the Supreme Court directive to Lanka Coal Company (LCC) to terminate a contract entered into with Swiss Singapore Overseas Enterprises Pvt. Limited for the supply of coal to Lakvijaya Coal Power Plant, better known as Norochcholai Power Plant, and to call for fresh bids by following competitive bidding procedure, the government had taken a decision on November 1, to allow Swiss Singapore Overseas Enterprises (SSOE) to supply coal until April 30, 2017.

Ceylon Electricity Board (CEB) sources who wished to remain anonymous told this newspaper that a cabinet decision taken on November 1, to allow SSOE to supply coal to Lakvijaya Power Plant would result in a Rs. 3.8 billion loss to the country.

“The country had already lost Rs. 3.8 billion for granting the tender to SSOE to supply coal to Lakvijaya Power Plant and the cabinet decision to allow the same company to supply more coal until end April 2017 disregarding the Supreme Court ruling on Case No: SC FR 394/ 20150 is to lose another Rs. 3.8 billion or more to the country. At the time the government has introduced a higher Value Added Tax (VAT) to recover money to pay the country’s debts, by not going into various deals to make money illegally, the government could have saved several billions of rupees and removed the VAT which had burdened the people,” sources alleged.

The Supreme Court order, AG’s Department letter to Dr. Batagoda and Ministry Secretary’s letter to CEB Chairman to grant permission to SSOE to supply coal until April 30, 2017

In order to purchase coal to Lakvijaya Power Plant for two years, tenders were called from prospective bidders in April 2015 and six parties submitted their prices where the lowest bidder was Nobel Resources International Pvt. Limited, according to the Technical Evaluation Committee (TEC) report.

According to the TEC report No: 15A of June 17, 2015, the bidders and their prices were as follows:-

Nobel Resources International Pvt. Limited – US $90.219 per MT,

SUEK AG – US$ 90.645 per MT,

Trafigura Pvt. Limited – US$ 101.968 per MT,

Adani Global Pvt Limited –US$ 103.108 per MT,

Swiss Singapore Overseas Enterprises Pvt. Ltd-US$ 103.782 per MT, and

Liberty Commodities Limited – US$ 113.604 per MT.

However later, the stipulated conditions given in the tender notice on the size of a coal that has to be supplied had been changed by the Standing Cabinet Appointed Procurement Committee (SCAPC), all the bidders were requested once again to submit their prices where SSOE – the fifth lowest bidder in the first round was selected for bidding the lowest price.

Hence, the TEC evaluated the bids again and submitted a new report to the SCAPC which made recommendations to the cabinet of ministers to award the tender to SSOE.

This decision prompted the second, third and fourth bidders in the first round to make an appeal to the Procurement Appeal Board (PAB). The Appeal Board decision was to cancel the tender and to go for re-tendering. As a result, the then Power and Renewable Energy Minister Champika Ranawaka got President Maithripala Sirisena to cancel this tender as per the Procurement Appeal Board recommendation.

To prevent a coal shortage for the Lakvijaya Power Plant operation, instructions were given to procure 50% of the total requirement through spot tenders until a fresh tender procedure is followed. Later the long term contract was offered to SSOE to procure the other 50% of the requirement. “As a result, LCC procured 1.1267 million of MT through spot tenders which saved billions of rupees to the country,” CEB sources added.

According to sources, SSOE price for a metric ton is US $ 74.03 whereas the spot tender price per metric ton in August this year was US $ 64.77. “The difference between the SSOE and spot tender price is US $ 9.26 which is a loss of Rs. 1.4 billion to the country. “When the LCC could procure coal for a much lesser price through spot tenders, what was the reason for them to go ahead with an agreement which the Supreme Court and the PAB wanted to cancel? According to SSOE’s pricing formula their prices are always 11.86% above the market price. Since the government needs more 1.1 million MT of coal to run the coal power plant till April next year, the loss would be Rs.1.487 billion to the country.

However, after Ranjith Siyambalapitiya took over office as Minister of Power and Renewable Energy after the 2015 general election in August, a new cabinet memorandum was submitted on September 16, 2015 requesting approval of the cabinet of ministers to award the tender to SSOE.

“Although the PAB recommended the cancellation of the tender granted to SSOE, the Power and Energy Ministry’s opinion under the new Minister was that since this particular tender had been cancelled and re-tendered three times earlier, it would not be appropriate to cancel the same tender over and over again. Hence on the recommendations of the TEC and SCAPC, a cabinet memorandum was submitted on September 16, 2015 and the cabinet granted its permission on September 22, 2015 to allow SSOE to procure coal till April 30, 2017,” sources alleged.

As a result of injustice meted out, Nobel Resources filed a fundamental rights case in Supreme Court which was later rejected by the three bench Judges that comprised of Chief Justice K. Siripavan and Supreme Court Judges P. Dep and Upali Abeyratne on June 24, 2016.

However although the case was rejected due to technical errors, a landmark judgment, according to CEB was delivered by the three bench, to terminate the contract entered into by LCC with SSOE considering the procedural flaws in the award of tender involved public funds.The verdict further states as thus, ‘I have no alternative but to declare the decision of the SCAPC to award the tender to the 22nd respondent (Swiss Singapore Overseas Enterprise) cannot stand valid in the eyes of the law.

‘Having given my anxious consideration to the contentions raised on behalf of the parties, I consider the act of decision made by SCAPC was outside its jurisdiction and therefore null and void for all purposes.

‘The cabinet memorandum misled the cabinet of ministers where in fact the SCAPC at its meeting held on June 29, 2015directed the TEC to re-evaluate the tenders without taking into consideration steps 1.3 and 1.4 of the evaluation of bids. The direction by the SCAPC to TEC to drop steps1.3and 1.4 cannot by any means equated to interpretation of the conditions stated in the bid bond.

Thus the cabinet decision taken on the memorandum was obtained by misleading the cabinet of ministers. The decision taken by the cabinet of ministers on September 22, 2015cannot be considered as a valid decision, in so far as it relates to the entering into a contract for one year with the bidder recommended by the SCAPC.  ‘Considering the procedural flaws I have referred above, the fact that the award of tender involved public funds and the solemn duty of the court is to protect the Rule of Law embodied in the Constitution in order to ensure its credibility in the faith of the people, I consider it appropriate to make the following direction – (a) The third respondent (Lanka Coal Company) may terminate the contract entered into with the 22nd respondent (Swiss Singapore Overseas Enterprises) for the supply of coal to the Lakvijaya Coal Power Plant after giving reasonable notice to the said respondent; and

(b) call for fresh bids in terms of the law, for the supply of coal for the said power plant following competitive bidding procedure- Chief Justice’.

Surprisingly, one week after the Supreme Court decision was made, Power and Renewable Energy Ministry Secretary Dr. B. M. S. Batagoda wrote to the Additional Solicitor General seeking his opinion on the SC decision and what action can be done thereafter.

“The Attorney General was the 75th respondent in the same case and it is shocking as to how the Ministry Secretary wanted AG’s Department views in regard to a Supreme Court (SC) decision. If the AG’s Department can supersede SC decisions then there is no need to have a court system in this country. Generally, based on the AG’s advice, cases are filed in courts but in this instance, it was other way around,” sources claimed.

According to Deputy Solicitor General Sanjaya Rajaratnam’s letter (Ref: E181/ 2016), dated July 18, 2016 to the Power and Renewable Energy Ministry Secretary, SC had not made any order/ direction to cancel the impugned agreement between LCC and SSOE and in the event the agreement is cancelled, in the absence of a court order, SSOE could go for international arbitration to claim for damages, and his view is that since it is a cabinet awarded tender, the cabinet can call for long term tenders or consider a more financially viable spot tenders or in the alternative to commence the process of calling for fresh tenders to take effect after the expiry of the existing agreement on April 30, 2017.

“This shows how the Deputy Solicitor General has allegedly given his opinion in contrast to the SC order, while stating that the Power and Renewable Energy Ministry Secretary can call for fresh bids, they can go for fresh bids after the expiry of the existing agreement in April, 2017. All these officials and the cabinet of ministers have to be charged on contempt of court. Even Chairman LCC, Attorney-at-law Maithri Gunaratne too has to face same charges for his failure to abide by the SC ruling,” sources claimed.

The sources further said that although as the Subject Minister Ranjith Siyambalapitiya has to take the sole responsibility to the course of action, Siyambalapitiya had no other options but to act on the directions of a powerful politician in the government.

“The reason why Siyambalapitiya crossed over to the government after the election is a known secret. It was to prevent any action being taken against him for his involvement in massive financial frauds at Deyata Kirula exhibition during Rajapaksa regime. Unless he agrees to what these powerful politicians wanted him to do, he knows well that the Financial Crime Investigation Division (FCID) would initiate an investigation against him. That is why Siyambalapitiya has granted the tender to SSOE and even after the court decision still offered the tender to the same company knowing well that it is contempt of court,” sources alleged.Meanwhile it is also learnt that Auditor General, in one of his queries, had mentioned about the loss incurred and it is surprising to note how the government ministers, when they were in the opposition accused the then regime for engaging in frauds when offering tender, are following the same footsteps without any shame.

“The Auditor General in one of his queries had stated what the loss to the country is by awarding this tender to SSOE in March 2016. But to date neither the Power and Renewable Energy Ministry officials nor the Ceylon Electricity Board (CEB) or LCC had send their answers to the query report,” sources added.

All attempts to contact Minister Ranjith Siyambalapitiya, and Chairman LCC Maithri Gunaratne failed. Although text messages were sent seeking their comments none of them replied until the paper went for publication.

However, Power and Renewable Energy Ministry Secretary, Dr. B. M. S. Batagoda refuting allegations said that the SC has never given any order to terminate the contract and to go for a fresh bidding but had stated that the LCC ‘may’ terminate the contract after giving reasonable notice to SSOE.

“The word ‘may’ say that either the contract can be terminated or otherwise by giving them a reasonable time. So we decided to allow SSOE to continue the supply until the contract lapses in end April. If we were to terminate the contract then we will have to give them at least three months notice. Then there is no time for us to call for fresh bidders and procure coal for the power plant,” Dr. Batagoda said.

When asked Batagoda as to why high cost long term tenders are offered when it had proven that spot tender purchase had saved Rs.1.4 billing to the country, the Secretary said that the cheapest way to procure coal is through long term tenders but not by spot tenders as reported in the media.

“The prices are fluctuated in the world market and long term tenders supply us for a fixed price whereas spot tender prices fluctuate. The present spot tender prices are very high compared to long term purchase. We are doing the best to the country. There is no deal as such as described in the media in offering this contract to SSOE,” he added.

1 Comment for “Court Order On Coal Deal Disrespected”

  1. gamarala

    Corruption thrives even under this so-called ‘yahapalanaya’ (good governance).
    Thus, the people pay for politicos to amass secret wealth.
    The president pretends ‘not to know’.

Comments are closed

Photo Gallery

Log in | Designed by Gabfire themes