|'Give us but a 100
The government's 100 day
programme is very much in the news with the new ministers rushing to articulate their
vision and their plans to change things for the better in their respective sectors. A
cynical public however asks the question, will all these glorious plans be translated into
action come the 100th day? The Sunday Leader spoke to nine ministers to ascertain what
plans were included in their 100 day programmes.
Minister of Rural Development,
"The main problem that is affecting the rural youth is the lack of capital to
start their own business, whatever it may be. The traditional system is to get loans to
start whatever enterprise, but the problem with it is that the person who gets a loan will
most probably utilise the money for his/her personal use and at the end of the day he/she
will not have sufficient capital to start the enterprise. That is a fact. Our aim is to
give them what they need. Say for example a man needs a tractor to cultivate his land, we
will give him the tractor, but he'll have to start paying back the cost of the tractor
once he starts making profits. There will be no interest to pay as well.
The plan right now is to go to other nations to collect funds so that we can start this
venture capital development programme as soon as possible.
The other thing that we will see to is to turn Paanaluwa state printing press into an
industrial park to get the maximum use of the land there.
We will also have Thuru Sevena sales promotion centres for plants in several central
points in and around the city. There's obviously a problem in marketing village/rural
products so to remedy that we decided to have fairs and exhibitions to promote this. So
far we've had one in Vihara Maha Devi Park in Colombo, the next is in Gampaha, and the
other will be held in Kalutara."
Minister of Health,
"We will upgrade the quality of service in private and government sector medical
institutions. First the institutions in Sri Lanka must be categorised. So far, there are 7
- 8 medical sectors in the country. With the consent of the provincial council, we plan to
reduce the medical sectors into five. After that, the ministry will take steps to improve
the health sector.
The next part is to concentrate on nutrition which comes under three categories; post
and pre-natal nutrition and children below three. This has to be done at village level. To
make this a success, the ministry will have to get every member of the medical sector --
village and urban -- involved. This will be a grassroot level effort.
The third is to look into the problems of families where mothers have gone abroad. More
often than not, we find children in these families lacking proper care. There are over
100,000 mothers working abroad.
The ministry has other plans to improve the health sector -- providing the much needed
equipment and appliances to hospitals. Also, at present, there is a shortage of middle
level medical officials (pharmacists, X-ray technicians, etc.) This problem should be
answered fast as Sri Lanka does not even have 50% of the requirement. Most of these
medical officials are lost to the western market; therefore, we have to take steps to
Minister of Trade and Consumer Affairs,
"We have a large number of plans, however, the priorities are privatising Sathosa
(CWE) outlets which will be open 24 hours so that pharmacies, telecommunications, and food
items -- like fruits and vegetables -- and other facilities will be readily available
round the clock."
"There will also be a complaints counter. The registration of companies will be
computerised by March 1 and there will also be a registration of companies act prepared.
"Furthermore, we will build a consumer protection bill within two months. The
import control department will be professionalised and permit oriented trade will also be
reduced. Salu Sala will be made to compete with other shops while state trade will be made
to compete with other organisations in some duty free items. The Army, Police and Air
Force uniforms will be done here and Mahapola will tie up with foreign universities."
Minister of Environment and Natural Resources,
"The vision of the environment ministry during the 100 day programme is to provide
a healthy and pleasant environment sustaining nature for the well-being of the people and
the economy. The mission will be to provide leadership to manage the environment and
natural resources to ensure national commitment for sustainable development for the
benefit of present and future generations.
The priorities of the 100 day programme are, to achieve effective environmental good
governance, manage land resources to maintain and enhance their quality and future needs,
manage quality and quantity of water resources for current and future needs, improve
bio-diversity, natural and cultural resources, manage waste streams to improve the
environmental quality and minimise public health risks and to use clean production as a
means of promoting efficiency.
Provisions to enjoy quality air resources and minimising the risk of climate change
will also be looked into during the programme."
The Minister of Fisheries and Ocean
Resources, Mahinda Wijesekera
"The ministry has identified a number of activities for the 100-day programme for
implementation under the six year development plan of the ministry.
The proposal for the Ceylon Fisheries Corporation is to strengthen the capability of
the corporation in fishing activities in collaboration with foreign and local investors.
The Coastal Resources Management in collaboration with the Coast Conservation Department
will undertake the construction of 1000 metres of revetments. The Ceylon Fishery harbours
Corporation will initiate joint ventures with private investors to develop anchorages
while the Coast Conservation Department will implement a beach access and restoration
programme in Mount Lavinia.
The Department of Fisheries will handle the preparation of a new fisheries act and the
re-organisation of the Department of Fisheries and Ocean Resources. The proposal for the
Fisheries Export Development Division of the Ministry of Fisheries and Ocean Resources is
the making of a video film on factors contributing to the wastage of fish.
The National Aquaculture Development Authority will undertake utilisation of 10 village
tanks and the construction of commercial fish ponds with the collaboration of the private
sector while the Social Development Division of the Ministry of Fisheries and Ocean
Resources will conduct a 30 day training programme for women."
Minister of Lands,
Dr. Rajitha Senaratne
"Areas that need urgent attention in the
ministry are allocating land to the landless and the encroachers. For our 100 day
programme we have earmarked 1000 acres of land which will be distributed among the
landless and poor people of the country. In collaboration with the Ministry of Housing
10,000 houses will be built on the land granted by us."
Minister of Tourism,
"The 100 day programme has been divided into three parts; part one is to promote
domestic tourism by giving a face-lift to the Hotel Corporation resorts to give a better
service to the domestic and foreign tourists. Part two is to revive foreign tourism.
Firstly we will study the problem and then start to promote Sri Lanka in the UK and Indian
markets with the help of the private sector thereby expanding tourism related employment
opportunities for our youth. We will also attract tourists by offering special offers and
incentives, keeping the individual preference in mind.
Finally we have so many hotel school qualified youth who are without jobs at the
moment. The Tourist Board will work in collaboration with the Foreign Employment Bureau
and the Merchant Navy to find employment for them. We are presently discussing this."
Minister of Port Development and Shipping,
"Areas that need attention in the ministry are provision of facilities to handle
larger ships with a large gate at the end of the Colombo Port, and a common user
multi-purpose alongside berth in the Port of Trincomalee. We also need to do an
Environmental Impact Assessment in the Port of Oluvil and work out a fast track
development strategy for the Port of Hambantota, which is thought to be an ex generation
The development of the Colombo South harbour is also something that needs urgent
attention. Other areas that need attention are, improving the cargo handling operations
and facilities, improving efficiency in the floating craft repair activities, trade
facilitation - removal of war risk premium, shifting of handling the all CCL cargo to the
Peliyagoda freight station, a feasibility study on setting up duty free shops for visitors
of the South Asian Region, introducing an internet cybercafe for a port wide network,
employee welfare facilities where setting up of pilgrim rests for employees will be looked
into and developing the human resource and management training division."
Minister of Agriculture and Livestock Development,
S B Dissanayake
"Under the100 day programme the ministry will conduct agricultural extension
programmes under the Agro, wells project, to promote subsidiary food crop cultivation in
Mahawa, Kurunegala. Conducting an irrigation systems maintenance programme for cleaning
and repairing the irrigation channels, training programme in water management in
Indipitiya, Menikwewa and Paluwewa, construction of toilets for 50 farmer families, the
introduction of a bee keeping development programme, enrolling 1000 export agriculture
crop growers under a crop insurance scheme, new district offices for Nuwara Eliya and
Galle districts, training 600 farmers in 14 districts as pre-preparation for the Yala
season, issuing of 50 cinnamon peeling machines to selected cinnamon growers. Providing
technical assistance establishing a factory for organically processed pineapple, to
establish a certified organic factory to process bottling and canning lime, tamarind and
fruits for the export market, promoting and providing techinal asistance to establish
'Health Food Counters' at super markets in Colombo, introduction of a kurakkan (52%) based
breakfast cereal to the market and the introduction of indegenous red rice (wild rice) to
international exhibitions and buyers are in the pipeline."
Interviews by Risidra Mendis, Mandana Ismail Abeywickrema, Shalindra
Seneviratne and Marianne David
CEB: Blunders and mantras
By Frederica Jansz
The new Minister for Power and Energy, the calm and collected Karu Jayasuriya has set
yet another deadline - which none doubt he'll keep. This time he has promised to resign
from his portfolio if he fails to resolve the present power crisis by June 30, this year.
Jayasuriya certainly believes in deadlines. This country was witness to the present
minister keeping his word and resigning from the office of the Mayor of Colombo when he
made a similar pledge.
Unfortunately, resignations of this nature do not always serve the principle intended.
The continuing power cuts with threats of further extended blackouts has reduced this
nation to despair. This sense of hopelessness has now permeated and spread to the
engineers employed by the Ceylon Electricity Board (CEB). Constant and regular
bureaucratic bungling and political fiddling has finally reduced the CEB to bankruptcy and
this nation to a constant scenario of blackouts.
The need of the hour, needless to say, is not for the new minister to resign his
portfolio if his resolution to solve the power crisis fails, come June 30. This country
desperately needs men of the calibre of Karu Jayasuriya who should ensure that busy
schedules do not interfere with a problem that requires his full and urgent attention.
While this country doubtless requires a long term policy that will end the power
crisis, Jayasuriya needs to interact even daily if necessary with engineers at the CEB and
work out a practical plan that will help resolve the power crisis not in the next 180 days
but in the next 14 days.
Rain, rain, come again!
It is not prayers to the rain gods that are required but good, hard policy decisions
that will help lift the CEB out of the present quagmire it is in.
Why on earth is Jayasuriya allowing the General Manager of the CEB D. C. Wijeyratne to
run around the hydro power dams in this country with a 'Manthara Hamuduruwo' from the
Kataragama Wadihitikanda to take a free trip around the reservoirs chanting manthrams?
As GM for the CEB, this country expects Wijeyratne to be working out feasible,
across-the- table negotiations, to even buy emergency power and help resolve this crisis.
Angry engineers at the CEB confided to The Sunday Leader that instead, Wijeyratne, during
the weekend of January 12 and 13, in a desperate bid to resolve the present power crisis
had visited Kataragama and bathed in water mixed with saffron. Thereafter he together with
the Welfare Officer of the CEB wore robes and walked around with a fire chatty on their
heads. While nobody faults Wijeyratne for his religious beliefs, the reality of the day is
that despite his earnest entreaties to the rain gods - the heavens did not open.
On January 4, this year the 'Manthara Hamuduruwo' was taken to Kotmale and the Victoria
dams using an official CEB vehicle bearing no. 65-1614. A total of 1200km was covered on
this trip, at state expense.
Later, on January 10, the Manthara Hamuduruwo was taken to Laxapana and Samanalawewa.
By Thursday January 17, 2002 they had not yet returned. This time too, an all expenses
trip using an official CEB vehicle bearing registration no. 65-1619 was used.
Unfortunately for Wijeyratne and this country, the Hamuduruwo, was involved in
committing offenses of a sexual nature to young girls - so much so, the incident evolved
into legal proceedings. A senior CEB engineer, tongue in cheek had this to say. "We
now fear that angry Gods will make the water situation in the reservoirs worse -deepening
the power crisis." So much for manthrams - the rains have still failed.
When Jayasuriya gave his 180-day deadline to resolve the power crisis - it is not
certain if he verified the reality of the present situation with experienced personnel.
Engineers at the CEB, who would doubtless have told him that given the present scenario
the possibilities ten to one, are that the Minister will have to go, come June 30th.
Jayasuriya when he took office on January 3, this year was told that the Gas turbine 7
(GT7) will be ready by March this year. The fact of the matter is that this plant has been
a failure from the day it was installed. Mr. D C Wijeratne was the Chairman of the
Technical Evaluation Committee that recommended this plant.
To put the matter in a nutshell a gas turbine should obviously be operated with gas.
However this gas turbine operates with oil. Engineers point out that this is the reason
for its failure to operate consistently.
This machine has been subjected to constant breakdowns. Each time the machine failed
foreign experts were invited to help repair the machine. The repairs were never permanent.
In August/September last year the GT7 gas turbine broke down once more. Outstanding
payments that were due to foreign engineers resulted in these experts refusing to come
down to Sri Lanka until their monies were paid. The machine lay unattended.
Wijeyratne and the former Secretary for Power and Energy Jaliya Medagama finally
reached a compromise with foreign experts who ultimately arrived. Local engineers however
say that this plant will not be reliable. At the height of power crisis, the former
minister Anuruddha Ratwatte ordered an inquiry to find out who was responsible for
recommending the GT7. Mr. D C Wijeratne and Jaliya Medagama jointly recommended this
machine to the CEB.
Meanwhile, D. V. E. N. Fernando the AGM (Generation) wanted to cash the performance
bonds of the GT7 machine due to its failure to perform. These bonds were valids upto
December 28, 2001.
The bonds however were never cashed. The agents for the machine, 'Fiat' threatened the
CEB that if the bonds were cashed they would not attend to the repairs. The loss to the
CEB as a result exceeds 400 million rupees.
The other issue is the JIBC Combined Cycle Power Plant. Senior Engineers at the CEB
claim that this was one of the most fraudulent 'deals' concluded at the CEB.
A. A. P. P. Seneviratne, former GM for the CEB, was Chairman of the Technical
Evaluation Committee which recommended the JBIC combined cycle power plant. This newspaper
has already proved in a previous article how Seneviratne made his money while being GM of
the CEB - wheeler dealing his way through projects and having fat commissions credited to
a joint bank account he shares with his spouse.
All island power failure
The fraud over this deal involved the payment of a 20% mobilisation advance despite the
statutory limits being at only 10%. Seneviratne kept quiet about this until the COPE
meeting last year where he met his waterloo. Seneviratne has argued that this enhanced
mobilisation fee was paid to complete the project ahead of time due to the power crisis.
The plant however is not yet ready. According to the systems control engineers and the
combine cycle project engineer the reliability runs have not yet even begun.
In fact a breakdown of this plant just a few days after the elections of December 5,
2001 caused an all island power failure. Another scandal brewing at the CEB is the Micro
SCADA. The story surrounding this deal goes thus. A tender was floated to upgrade the
Supervisory Control and Data Accusation (SCADA) of the system control. The bids were
called in April 1994. After an exhaustive analysis and negotiations, the cabinet of
ministers by their reference 98/272/20/015/TBR dated March 18, 1998 approved the award of
the tender to M/s G E Harris Energy System Controls of the USA. The project cost was
valued at US $5,505,363 ( SLRs. 21,092,915.00.)
The original SCADA system installed in 1983/84 in the CEB was by ABB Switzerland. In
January 1999 there was a breakdown of the Systems Control Centre. Immediately ABB
Engineers were summoned to attend to the breakdowns. ABB proposed that they should install
a micro SCADA system and made emphasis that this should be done immediately since the Y2K
problem was envisaged to occur by January 1, 2000. A contract worth Rs. 75 Million was
awarded to ABB to purchase two computers with the necessary software. What is important to
note here is that the G E Harris offer had all the facilities for the Y2K problem. Instead
however a rush purchase was made from ABB and at an exorbitant price.
Six remote terminal units (RTU) were also purchased and connected to the micro SCADA
system. The cost of this was Rs. 59 Million.
The new Chairman of the CEB, M. Prelis, unfortunately can work only on a part time
basis as he has his own business at the Nations Trust Bank. Needless to say the CEB needs
a full time Chairman and a Vice-Chairman. The challenges are enormous. The staggering
state institution urgently requires a more dynamic and permanent set of officers. Over to
you Mr. Minister.
A slippery deal
By Amantha Perera
Since the formation of the UNF government The Sunday Leader has been advocating that
the new government should really take a long hard look at the privatisation deals that
have been carried through with the blessings of the Public Enterprises Reform Commission
Four agreements should be gone into and laid to rest once and for all. Air Lanka, Sri
Lanka Telecom and Shell, all three signed under the PA. But, the UNP, despite its track
record as a better economic manager was the party who set the ball moving.
The privatisation of Lanka Lubricants took place in July 1994, just as the UNP was
dumped by the voters who welcomed the PA as the be all and the end all. The PA did its
little bit for the deal when it amended several clauses and allowed other importers of
lubricants to enter the local market. That was in 1999.
Lanka Lubricants was sold to Caltex Trading, Dubai for US $ 4.9 million and two
installments of US $ 2.65 million. Like in all the other cases, here too Caltex was
guaranteed a monopoly by the agreement that the UNP signed in 1994.
Several clauses in the deal make sure that no other party can take on Caltex, which on
the estimates of their officers, enjoys a market share of 92% to 97% while six other
competitors fight out for the remainder. Article seven of the agreement involves the
guarantees. The agreement guarantees, "the government will extend tariff
protection," in the face of competition. The government would guarantee at least a
10% price deference to Caltex, which is per the agreement, but in reality the difference
has been much more.
No company can sell or import lubricants below the factory price of Caltex and if that
is the case, the government will make sure that the difference would be added on as a tax.
The agreement also includes a clause that Caltex would have the services of all service
stations coming under the Ceylon Petroleum Corporation. Sometime ago its competitors
alleged that Caltex was using its market might to stop vendors from selling their
products. They have since reverted to marketing their products at sports shops,
supermarkets and CWE outlets. The Caltex deal will run through till 2004.
Caltex today has become one of the largest profit making entities in Sri Lanka purely
because it secured the deal, where one bidder was none other than Shell. In 1999 however
the government decided to allow others to import lubricants while Caltex still had the
sole right to import raw material and process. Though ostensibly it was a move to
liberalise, no such thing happened.
The process hit a snag right at the beginning, when the government wanted Rs 50 million
as license fee. The intended licensees went to court and brought down the price to Rs 5
million. There were six licensees, including Mobil, Shell, and Castrol. However none of
these players were ready to face the situation that evolved.
"It was our mistake that we did not push enough so those clauses were removed or
nullified," a high ranking source from one of Caltex's competitors told The Sunday
Leader. Even though the agreement with Caltex included guarantee clauses, the licensing
agreements did not include any such insurance clause.
The new licensees did not expect to get the same tax benefits as Caltex, in fact they
had calculated that their products would be 12% above Caltex prices in landed cost. They
were in for a painful shock.
In January 2000 just one month after the licensees were granted the difference was 18%,
after the budget 2000 it went up to 25%.
The real time effect and the costs that the Sri Lankan public has to bear due to the
tariff protection clauses were clear when the Ceylon Electricity Board last June called
for tenders for oil for its Pielstik engines. Three bids were short-listed. Caltex at Rs
81.83 (Taro), Rs 78.91, Shell Rs 87.33 and Mobil at Rs 77.67 per liter.
The three bids were opened in the presence of the bidders who went back to their
offices with the thought that a transparent tender evaluation would take place. But that
was the last they heard of the matter.
In September Mobil wrote to the chairman of the tender board seeking information on the
tender. Silence prevailed.
After several representations made to the Ministry of Power and Energy, in October the
vice chairman of the CEB informed Mobil that a decision had been made to purchase the
lubricants from Caltex as they enjoyed a tariff protection clause in the agreement with
the government and that the tender itself has been cancelled.
Mobil was informed that if it needed further clarifications it should address its
queries to the Secretary to the Ministry of Power and Energy, which came under the purview
of Anurudha Rattwatte at that time. The queries went unanswered.
The CEB requirement was calculated to be approximately 2 million litres per year valued
at Rs 150 million and the agreement made sure that the CEB paid more while cheaper rates
were available. The actual price difference between the quoted price in the tender and the
final supply price is estimated to be in the range of 25%.
The licensees even had problems when they wanted to make representations to PERC. One
meeting with one of the two top rankers in PERC lasted just 10 minutes after two hours of
waiting and the final result was that he would look into their grievances. And that was
With the arrival of the new UNF government, the six licenses have once again begun to
make representations. The appeals have gone to every one from Power and Energy Minister
Karu Jayasuriya to Secretary to the Treasury Charitha Ratwatte. One such appeal went to
Consumer Affairs Minister Ravi Karunanayake who agreed to meet the representative.
Though the lubricant industry does not come directly under Karunanayake's ministry, the
Fair Trading Commission does and it is through the commission that Karunanayake can at
least hope to correct the imbalances of the lubricant market.
More than creating a one sided market, such privileged treatment sends the wrong
signals to foreign investors.
When the Daily News carried a banner headline last week that the lubricant market would
be liberalised, local representatives in Colombo got calls from the foreign principals as
to what exactly was going on. "They had a problem trying to figure out why we were
complaining that we could not operate in Sri Lanka while financial wire services were
reporting the lubricant market was to be liberalised," one representative told The
Sunday Leader. The services had picked up the story and filed it on their wires.
The story was a classic case of cart before the horse. While no discussions have taken
place on the lubricant market, the story sent out the wrong signal that things were moving
towards a level playing field. This is the second time since the government took office
that this happened. It happened when there were screaming headlines that Air Lanka, Shell
and SLT deals were to be investigated.
Let alone investigation, some government ministers handling finance had no idea how to
take the first step.
However, some foreign players in the lubricant market are giants in a global sense and
could do wonders to Sri Lanka's image if they come in big time. Take for instance Mobil
whose principal Exxon Mobil was number one in the Fortune 500 list in 2000 with a net
revenue of US $ 210 billion.
The Sunday Leader learns that Exxon Mobil has signaled that it would reconsider
investment opportunities in Sri Lanka provided the right signals are sent. Unfortunately
that has not begun to happen.
Once again it has been a case of one man trying to take on and take out a monopoly.
Karunanayake has taken it upon himself that there should be no monopolies in Sri Lanka and
he is moving as best that he could with limited yet welcome results. Hats off to him for
at least trying, while others have been caught playing it safe.
Our recent revelation on the Prima deal seems to have upset many quarters including
some at the very top. Added to this Minister Ravi Karunanayake's outbursts on the issues
of the cost of living, which he has tried his very best to reduce in the interest of the
country, have also met with resistance in certain quarters. His contention was that
parties to several privatisation agreements should sit down and renegotiate in an amicable
environment, since certain clauses in their sale agreements cleverly worked out during the
PA regime, hits the very hearts of the poor and are therefore, not in the best interests
of the country. Shell, quite prudently came to terms and offered a helping hand. We are
thankful for small mercies.
Multi-national bashing is not what we Sri Lankans like although this was the order of
the day particularly during the socialist period 1970 - 1977. However, it is also
incumbent upon these so-called multi-nationals to consider the plight of our poor when
negotiating contracts with third world countries such as ours. In the case of the Prima
contract, the entire bread and wheat flour requirement of the country changed hands from
the government to Prima, upon the sale. They should have realised that this is one staple
our poor folk live on and any manoeuvre to unduly burden them, will have political
ramifications for the government of the day. This is exactly what has happened now. Prima
got the better of our Treasury negotiators.
We have showed over the last three weeks how one-sided the Prima contract is. On the
one hand we have passed the monopoly of bread and wheat flour over to Prima where they can
make huge profits in addition to the wheat bran that they get free and on the other hand,
they have tied the noose around our necks making sure we cannot import wheat flour to
compete with them with a most unfair import duty of 25% for wheat flour, whereas, they can
import wheat grain, duty free. A sister company of Prima's Grain Elevators have a Rs. 12
billion fine already handed out to them by the Supreme Court of this country for evading
paying import duty for some feed material they imported previously.
The fact is that no Sri Lanka government can have any control over the import of wheat
grain in the future. This entirely is now in the hands of a foreign company, Prima. Thus,
the government has no control over prices of wheat flour and therefore, the price of
bread. The monopoly of a vital staple food item of our people is now in the hands of a
foreign company. Their actions will have adverse repercussions on the cost of living and
as a result on any elected government. Take note of the following examples
a). Prima paid only US$ 65 million for the Trinco Mill with a capacity to mill about
3000 tons of wheat grain a day, whereas the proposed Serendib Flour Mill in the Colombo
Port with a capacity of 1000 Tons a day is estimated to cost US$ 50 million. Government
valuation of US$ 60 million according to industry sources is ridiculously low and it is
interesting to note that the "PA" government did not call for world-wide tenders
for the sale of the Trinco Mill which would have had many positive responses from
international grain trading houses and millers around the world.
b). Prima is paying only a nominal lease rent for the land, building put up by the
government as quarters for the staff (at the time estimated at Rs. 450 million) whereas
the Serendib flour mill is called upon to pay US$ 100,000 each year (about Rs. 9.5
million) as rent to the port. In the contact of sale to Prima, the land and buildings at
both Colombo and Trincomalee has bene leased for another 55 years.
c). From the very inception Prima was making colossal profits from the sale of wheat
Bran and from despatch money and this was far more than reasonable compensation to defray
their initial investments. Despatch money earned is estimated at US$ 50,0000 per vessels.
At 20 vessels, per year on average they have earned US$ one million each year.
d). Also, the agreed yield of wheat flour from wheat grain supplied by the Sri Lanka
government as per the original contact was 74%. The actual yield is said to be in the
region of 76%. Thus 2% of the wheat flour milled that rightfully belonged to the
government, went to Prima without any payment to the government. This works out to 20,000
MT of wheat flour each years on average, or Rs. 300 million each year.
e). The proceeds from the sale of wheat bran was the basis of defraying their original
investment of US$ 25 million over 20 years.
The negotiators for the PA government failed to take into account these advantages and
the additional sources of income mentioned above, when negotiating this sale. Wheat flour
imports are now free and anybody can import. But there is a catch. While Prima pays no
import duty for wheat grain, the import duty for wheat flour is 25% at present. Unless
Prima is also charged the same rate for their wheat grain imports, there is no chance for
the private sector to import wheat flour and compete in the local market with Prima's
Further, the Customs Department has a valuation of US$ 190/- MPT C &F Colombo for
wheat flour, whereas, one can buy Indian or Pakistan wheat flour at around US$ 165/- PMT
C&F. The import duty is based on the Customs valuation. However, there is no valuation
by the Customs department for wheat grain, except as declared, by Prima. On top of this
there is now a 40% surcharge on Customs duty. This means that while the effective duty
paid by Prima for wheat gain is zero, private sector has to pay 35% for wheat flour - a
clear advantage of 35% for Prima. This in effect further enhances the monopoly of wheat
flour, for Prima.
The agreement that the proposed new flour mill in Colombo - Serendib Mill - will
provide competition to Prima and stabiles prices also does not hold water. Under this
agreement, Prima will be solely responsible for the operational chain from the purchases
of wheat grain, to the milling and distribution of flour, Prima thus enjoys unlimited
power from now on to manipulate import prices and other related costs that have a direct
bearing on the selling price of bread and wheat flour to our people. And, the profits go
to Singapore! With the profits made over the past 23 years and the enormous profit
potential from the new contract, Prima can undercut and under price their products to kill
any possible price challenged from the new comer. Would Prima be able to do this in their
own country, Singapore? Certainly not.
If the UNF government will not re-negotiate their deal, our people will have no option
but to stomach costly bread and wheat flour based foods - courtesy of Prima - for another
55 years. It is therefore, incumbent upon this government to bring Prima to the table.
Prima in a press release on signing the agreement stated that "this long - term
commitment (55years) serves as a direct reflection of their (Prima's) dedication."
Who would not be dedicated to a country that makes preposterous arrangements for
foreigners to make easy and certain money like this, for the next 55 years?
Meanwhile CWE who was the sole importer has now lost their best source of income. Their
main profit was out of wheat imports and its distribution all over Sri Lanka. CWE's other
imports are at a terrible loss.
The questions we wish to pose are:
1. Why was a worldwide tender not called?
2. Why was it sold in a hurry before the first contract with Prime expired, in 2005?
3. Why is Prima permitted to import any quality of wheat grain when previously the CWE
imported (50% soft wheat and 50% hard wheat) from only USA, EU, Saudi Arabia, Australia
and Canada? If Prima is permitted to import an inferior quality of wheat, won't the
quality of bread suffer? When CWE was the importer, Prima was so adamant that wheat grain
of cheaper origins were not imported into Sri Lanka and restricted the origins to those
mentioned above. But now, they are more than happy to import wheat grain from Turkey,
India, Pakistan etc. which are cheaper origins.
4. How was the valuation done? What expertise had the government valuer to price a
monopoly business such as Prima?
5. Should not the import duty be the same for wheat grain (imported by Prima) as for
wheat flour imported by the private sector?
The questions we ask are simple. With the scales of economy of importing 100,000 MT of
wheat grain at a time and an investment already paid for many times over, if Prima is
unable to produce wheat flour at a cost cheaper than what importers can import wheat flour
in to this country on equal terms, Prima should not be in this business. If one can bring
wheat grain in bulk, mill the wheat, and take the wheat bran (26%) and still want a 25%
import duty as advantage over the private importers of wheat flour, what kind of deal is
It is now up to the new government, to look into these deals, Prima in particular, and
alleviate the suffering of our people.
We have nothing against Prima on a personal basis. But we feel for our country. When
multi-national companies come here and take us for a ride, it is our duty to make the
public aware that they are being robbed. If Prima is a reputable company they must
understand the social and moral consequences of this contract. Poor people in our country,
in remote areas, eat bread at least for one meal each day, if not two. They eat this with
a little pol-sambol. Each time the price of bread goes up, some of them have to switch to
eating cheaper alternatives such as manioc or bathala. When the price of rice goes up,
poor people eat more of bread. The poor, which constitutes 90% of this country, thus
depend on bread. It is not like any other food item. Governments have won and lost
elections on the price of bread and rice. Prime must understand that they are hitting us
where it really hurts - at the very hearts of our poor people. Every time they eat a slice
of bread, they must know that they are contributing an unconscionable, unaffordable
proportion of that slice in the form of profit, to a foreign company because of a few
foolish and pig-headed bureaucrats.
We understand that as businessmen, Prima would want to maximise profit. But it must not
be unconscionable profit, not the kind of profit that affects the very core of our
society. All we ask of Prima is for them to re-negotiate this contract on a fair basis. We
certainly need to incorporate a new formula for pricing of the wheat flour, not the
win-win, one-way formula that exist in the sale agreement and secondly, to allow the
private sector as well as the CWE to import wheat flour on the same import duty, as
Prima's import of wheat grain.We rest our case, in front of the general public, let them
be the judge.
- by a special correspondent
In last week's article 'Prima's pricing formula' we had inadvertently left out the
price adjustment clause in the sale agreement which reads as follows:-
PCL may adjust the formula price of General Purpose Standard Wheat Flour if;
a) during the Relevant Period the statistical trend of (A+B) varies by more than + US$
20 per metric ton. or
b) during the Relevant Period the statistical trend of the Agreed Exchange Rate varies
by more than + per cent, or
c) other cost elements including carrying costs of security stock piles, utility
charges etc. have substantially changed in the mutual opinion of PCL and the government to
be determined within a reasonable time.
some fast action
The reaction to the series of articles on the privatisation programme has been a
welcome surprise to The Sunday Leader and to those who have been involved.
The public response has been overwhelming. Readers have written arguing that the deals
that the UNP criticised while in opposition should be looked into. On the other hand, some
of the players involved in the deals have been much more forthcoming with information than
before. Take for instance Shell, who provided more access following an article on the LPG
industry and has remained accessible ever since.
Other than for Prima, whose sales agreement has been viewed critically in these
columns, that is. The wheat giant has so far maintained a stoic silence in face of such
criticism. But there have been indications that it too was feeling the pressure.
Along with Prima, the new government too has been found wanting. The lame reaction to
the deals since taking power is a poor show when one compares all the hue and cry the UNP
raised in opposition.
One reader last week wrote to us, all the way from Matara, on his views on the
"Important factors which are ordinary elements of commercial negotiations have
escaped the minds of authorities and have not been taken into account," wrote Upali
Gunesekera, adding that "many reasons have been advanced to justify the privatisation
of the national asset and with it the national resource. None of them can withstand the
glare of public scrutiny."
Gunesekera did not hold back on his criticism on the media when he wrote, " the
media did not have the strength to focus on national assets, which were being dealt willy
nilly by inexperienced bureaucrats".
He argued that "where national interest is at stake there is no place for
compromise or inaction. The error of the past has to be set right. It is necessary to
respond to the silent public outcry".
"The time has come for a ruthless review of all such agreements of privatisation
regardless of where the blow may fall," Gunesekera concludes.
Unfortunately, those in the hot seats of power do not feel that the time has still come
and all the action has been limited to words. The people of this country did not send the
PA packing home for a bunch of UNPers to usurp the positions and churn out headlines in
the Daily News. They deserve a better deal than a headline praising the government.