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Govt. rejects offer to retake CWE

By  Frederica Jansz 

The government has rejected an offer by the three member consortium that purchased a 40 per cent stake in the Cooperative Wholesale Establishment (CWE) to return their investment and take back the cash riddled institution.

A high ranking source of the consortium said that at a meeting with President Chandrika Kumaratunga on Thursday, the President had quickly rejected an offer by the consortium for a refund of their investment of Rs. 680 million in the CWE despite entertaining consistent allegations by members of the United People's Freedom Alliance (UPFA) that the multi million rupee investment by the private sector consortium in December 2003 reeked of corruption.

Hard on the heels of engaging in a multi million rupee row with Prima Ceylon Limited, the three member business consortium, International Grocers Association (IGA) comprising of Richard Peiris & Co., Carson & Cumberbatch and Ceylon Biscuits Limited which purchased 40 per cent of shares in the CWE have told the new government to pay back their investment of Rs. 680 million and that the UPFA is more than welcome to have the CWE back.

Fed-up with accusations consistently being made by the present government that the part privatisation of the CWE concluded in December last year reeks of corruption and was not a deal in the best interest of the country, the business consortium has told Commerce and Consumer Affairs Minister Jeyaraj Fernandopulle also that if the government so wishes it can pay the consortium back its investment  even on an installment basis and take back the CWE and run it wholly as a state owned institution.

Fernandopulle we learn has also hastily turned down the offer.

The business consortium paid for a 40% stake in the CWE after having followed government tender procedure. As a result of the very high price paid by the consortium, the government's share value of 60% holdings of the CWE has risen enviably.

Forty percent of CWE shares were sold to this consortium during the brief reign of the former United National Front (UNF) government. Running at terrific losses, the CWE had since 1993 accrued bank debts to the tune of Rs. 7 billion while the cash straddled organisation was paying  Rs. 900 million on interest only annually.

As a result, Fast Moving Consumer Goods (FMCG) could not be sold at concessionary prices. The CWE last recorded a profit in 1993. Since then the CWE's operations appeared to fail and the institution incurred substantial losses.

Established with the main objective of stabilising food prices and assuring food security the CWE since 1996 has imported chillies, lentils, onions, potatoes, rice, sugar and wheat.

The CWE also undertook to distribute Prima flour through the Food Department and as a result extra staff were required. Hence, staff numbers rose to over 6,000. However, since the flour was being subsidised, the CWE also was granted a subsidy by the Treasury. Despite the subsidy the CWE continued to run at a loss.

Employee salaries alone range between Rs. 60-65 million every month. On top of this are costs such as rent, electricity bills, welfare and uniforms and costs such as transport, maintenance, etc. Under these circumstances the losses nor the bank bills could ever have been settled.

The three member consortium in addition to its investment of Rs. 680 million also continues to pay rent for all CWE premises.

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