31st October, 2004  Volume 11, Issue  16

First with the news and free with its views                                     First with the news and free with its views                             First with the news and free with its views                                    


Para military groups and CFA in the balance

By Frederica Jansz

If there is one single aspect of the peace process by which international facilitators and the Sri Lankan government could be seriously faulted it would be that it has failed - miserably  and collectively......


 Top Issues Stories

> Accessing the port's computer deal

> Vehicle tax takes toll on importers

> Rice and sugar deals raise eyebrows

> Pot Shots

Para military groups and CFA in the balance

Army Commander Lt. Gen. Shantha Kottegoda, Velupillai Pirapaharan and Karuna Amman

By Frederica Jansz

If there is one single aspect of the peace process by which international facilitators and the Sri Lankan government could be seriously faulted it would be that it has failed - miserably  and collectively - to clamp down on extra judicial killings carried out by both the LTTE and para military groups or, so the Karuna faction.

The LTTE is today charging that auxiliary forces under the pay of the Sri Lanka military are guilty of killing over 60 LTTE cadres in these last six months.

That LTTE cadres are being killed perhaps is true. That they are being killed by special forces secretly employed and trained by government forces is debatable. Available evidence proves that Karuna loyalists appear to have been engaged in a silent but deadly war against LTTE cadres. And vice versa.

Carrying weapons

While giving credence to the LTTE claim would be premature by far, the fact however is that cadres attached to the Eelam People's Democratic Party (EPDP) are publicly seen in Colombo carrying weapons. Not only do they carry guns they have also been known to threaten members of the public with these weapons.

Army Commander Lt. Gen. Shantha Kottegoda, said he is unaware if EPDP members are on any government payroll, but reiterated that the army has been over a period of time "feeding these people and giving them rations."  Gen. Kottegoda said the army compensates cadres in this manner from the EPDP, EPRLF (Perumal faction) and PLOTE as they have been, and are used as informants. (See box for army chief's comments)

Lt. Gen. Kottegoda denied the army continues to use para military forces to target and kill LTTE cadres. "This is an accusation the LTTE makes," Kottegoda said, adding however that if indeed over 60 Tiger cadres have been killed this last six months "it is due to Karuna loyalists carrying out an internecine war," he said.

If, for the sake of argument, the LTTE accusation in relation to para military forces carries any truth, what cannot be ignored is that the LTTE, from the very inception of the ceasefire in February 2002, have also never called a halt to extra judicial killings. The Tamil Tigers have continued to target and kill intelligence operatives as well as Tamil people identified to be lending information to government forces and Tamil political opponents.

The reality is that the LTTE did not begin killing Tamil political opponents and informants as a kind of tit for tat when some of their cadres were apparently targeted and killed. The Tamil Tigers have systematically and mercilessly been wiping out Tamil opponents including members of the EPDP, the Varathan group, Saba group and the PLOTE Mohan Group. These murders have been going on before and after the signing of the ceasefire agreement in 2002. Neither the then United National Front (UNF) government, nor Norwegian facilitators nor for that matter Scandinavian peace monitors have had the courage or the moral and social integrity to call a halt to these diabolical killings and say enough is enough.

Groups under army

International peace monitors and facilitators lamely proclaim that these murders come under the jurisdiction of the law enforcement authorities - and that is that. No effort has been made to halt the Tigers in their deadly game.

Perhaps in this pre negotiation period, the government should perhaps first consider how it would be possible to even negotiate terms and conditions laid down by the Tigers for an Interim Self Governing Authority (ISGA) - one that would mean passing on the powers of governance to the LTTE when they have proved they are incapable of conforming to any form of democratic principles of governance given their high level of intolerance towards political opponents.

After all, whatever the faults the UPFA may have it does not go around taking pot shots at opposition political party members. If it did, half the UNF would be dead. As, history records, are members of the EPDP, EPRLF and TELO. And their members have been killed - brutally - all because these Tamil groups dared to oppose the policies of the LTTE.

Since the Karuna-LTTE clashes, from March to September 2004, there have been 78 murders. Over 60 are identified to be LTTE cadres and some civilians. Most of these murders took place within government controlled areas.

The LTTE continues to insist that eight para military groups are working for the Sri Lanka Army. They claim they are the Razik Group, the PLOTE Mohan Group, EPDP, PLOTE, EPRLF - Varathan Wing, Varathan Group, Saba Group and TELO. The Army Commander confirmed that these groups did work with government forces, but have subsequently been enlisted as soldiers. At least those that escaped assassination by the LTTE.

Monthly salary

The LTTE claims and sources based in Batticaloa also claim that the "current position" of the Razik group is that it is operating as a para military outfit directly under the Sri Lanka Army. However, Lt. Gen. Kottegoda said members of the Razik group have now enlisted with the Sri Lanka Army. Therefore, they wear military uniforms, carry weapons publicly and similar to any other soldier they are paid a monthly salary for their services.

The PLOTE Mohan Group has been identified by the LTTE as operating directly under the Directorate of Military Intelligence (DMI). This group consisted of some PLOTE cadres who originally broke away from LTTE ranks. They used to operate from four different places in Batticaloa. One at Siripala Building in Batticaloa town, another at Palpody Company which was formerly Sam Thambimuttu's residence in Batticaloa, also at the SL Army's 233 Brigade Headquarters in Batticaloa, and from the army camp in Paper Mill, Valachchenai.

It is alleged that the members of this group openly carry weapons and that security protection is provided to their families on request. That they constitute part of the Army's Long Range Reconnaissance Patrol (LRRP) and are called 'Deep Penetration Commandos.' One 'Paneer' has been identified as being in charge of the activities of the group since PLOTE Mohan himself was gunned down in July this year in Colombo outside the House of Fashion. PLOTE Mohan was unarmed at the time he was murdered.

Christened Kandiah Yogarajah from Kannakudah, PLOTE Mohan became a Sri Lanka Army informer in 1989. In 1990 the DMI setup its office at the Batticaloa prison and began operations. This group is believed to have made successful infiltrations into LTTE territory and carried out several ambushes against LTTE cadres. There is speculation that later PLOTE Mohan was brought to Colombo and put in charge of counter insurgency activities. This group consisted of members carrying names such as Kuyilan, Saleem, Niththy and Cashiyar. In 2000, Niththy together with some other members of the group were killed in front of the Siripala Building in Batticaloa in a suicide attack carried out by the LTTE. Later Cashiyar was also killed after the ceasefire agreement came into being. PLOTE Mohan himself fell victim to the LTTE's pistol gang on July 31, 2004, and his deputy, Ramesh suffered the same fate on August 28, 2004.


Lt. Gen. Kottegoda said PLOTE Mohan was indeed an army informant. As to the other members of this group he said even as Army Chief he is not aware of other names as it was the DMI that handled this group.

The Army Chief says he is also not aware if members of the EPDP are on a government pay roll. "As far as I know we only give some of their cadres in the east rations," he said.

However, we reliably learn that members of the EPDP are indeed on government payrolls - the Defence Ministry pays a monthly remuneration package to certain EPDP members, the payments are classified as being made for homeguards. The LTTE has long claimed that the EPDP works alongside government forces. The Tigers charge the EPDP is very strong in Batticaloa and have considerable financial backing.

The LTTE has accused the EPDP of carrying out psychological operations against the Tamil Tigers.  That they conduct poster campaigns, and a broadcasting radio service from their offices. The LTTE maintains that the EPDP carries weapons openly and supports the Sri Lanka Army. That all members of the EPDP are considered as para military members of government forces.

A person known as Viji who was in charge of EPDP cadres in Batticaloa was killed by the LTTE during the ceasefire agreement. Other senior cadres of the EPDP have also been killed during this period.

Hand outs

It is alleged that PLOTE, which is separate to the PLOTE Mohan group, continues to have a presence in Batticaloa and are armed, working alongside government forces. The factual position is the PLOTE movement began to have connections with Sri Lankan security forces during August of 1987. During the IPKF period PLOTE leaders like Uma Maheswaran, Vasudeva, Sivaram, Manikkathasan, Kannan and Subash had a series of discussions with then National Security Minister Lalith Athulathmudali and agreed PLOTE would operate jointly with Sri Lankan security forces. They established camps in Colombo and areas in the south and were trained by the Sri Lanka Army.

Later they established camps in Vavuniya under the leadership of Manikkathasan. They also established camps in Batticaloa under the leadership of Vasudeva, Kannan and Subash. After the IPKF left Sri Lanka PLOTE actively assisted government forces in conducting interrogations, ambushes and roundups. PLOTE has contested elections under the name Eelam People's Democratic Liberation Front.

Lt. Gen. Kottegoda confirmed the army hands out rations to members of the PLOTE group.

The EPRLF Varathan Wing also continue to have an armed presence in Batticaloa. They have a camp at Lake Road, Batticaloa. After 1992, the EPRLF established their offices in Batticaloa and began to work jointly with government security forces.

Separately, the Varathan group, an arm of Tamil Eelam Liberation Organisation (TELO) was also absorbed by the military. Varathan, a hardcore cadre attached to TELO, was later enlisted by the army. Varathan, together with two of his brothers and some other TELO members operated out of the Arayampathy army camp in Batticaloa. The LTTE claims that this group assassinated many LTTE cadres and sympathisers in the Arayampathy area.


During the ceasefire period, Varathan and his brother were killed by the LTTE's pistol gang. One brother was seriously wounded in a shoot-out and crippled. Subsequently, Varathan's followers were also murdered. One by one, by the LTTE's feared pistol gangs. All these murders were after the ceasefire was implemented in February 2002. The group is now completely defunct.

Another group known as the Saba group was also wiped out by the Tamil Tigers. Identified by the LTTE to be also working as a para military group with government forces they were targeted and killed by the LTTE during the ceasefire period. Saba himself was first taken in by the Tigers held in their custody for sometime and brought back later to Batticaloa where he was executed. Other members were also killed and the Saba group is no more in existence.

That these killings continue is a gross violation of the ceasefire agreement. Head, Government Peace Secretariat, Jayantha Dhanapala maintains that he is not aware if indeed auxiliary forces are still in operation. He says there is no proof but that this is a constant complaint made by the LTTE.

Given the available evidence the fact remains the LTTE has hardly cause to complain. It's a case typical to that of the pot calling the kettle black. This then surely, is political duplicity of the worst kind - from both sides.

"Large number of army intelligence operatives have not been killed."

Army Commander, Lt. Gen. Shantha Kottegoda said contrary to reports, a large number of special forces intelligence operatives have not been killed by the LTTE. The factual position is that a total of seven army and police special forces intelligence operatives have been killed by the LTTE since the signing of the ceasefire agreement.

"I know that after the safe house at Athurugiriya was exposed there was a perception that as a result, intelligence operatives were identified and assassinated - but this is not factually correct," the Army Chief said.

Separately, another 25 civilians, according to military statistics comprising of both Tamils and Muslims have also been murdered since the ceasefire came into being. They have been assassinated after being identified by the LTTE to be serving the military as informants.

Commenting on LTTE cadres being killed in recent months, Lt. Gen. Kottegoda said "the LTTE is trying to blame us - but these killings have been carried out by Karuna loyalists." He said even the murders "at a Kottawa safe house - the army had nothing to do with." The Army Chief maintains that a Sinhala man killed with the others at this house was by choice working with this group who were all Karuna loyalists. 

Kottegoda added that the LTTE has now realised "they cannot resolve this situation and that they are unable to move freely within their so called controlled areas due to the Karuna faction still operating in these areas in the east. This is why they are now trying to blame us," he said. "As much as the LTTE claims to have lost over 60 cadres the Karuna faction has also lost 30 to 40 people," he maintained.

Kottegoda insists the army is not using auxiliary forces to kill LTTE cadres. He says the killings are all as a result of the split with Karuna and are being carried out by pro Karuna loyalists.

Asked if he believes the murders will stop he said the army has brought it to the attention of the SLMM but "this, after all, is a terrorist group," he said, not sounding optimistic that they can be counted on to cease the brutal assassinations. "I think it will take some time since Karuna's people are still in the area," he said.

Asked if the army is glad Karuna loyalists are eliminating LTTE cadres, the Army Chief responded, "I won't say killing each other is a good thing. If the LTTE cannot get a foothold in the Eastern Province and the people of the area also don't want the Wanni cadres don't you think this is a disadvantageous position for Pirapaharan? He wants to project himself as being the sole representative of the Tamil people in the entire north and east. So, if the LTTE does not have control in the east, but some other party gains control it's not an advantageous position for him. The point is that the LTTE must realise they will never get what they want by fighting - by war. Only a political solution can resolve this issue."

And speaking in true military style, Lt. Gen. Kottegoda said, "they thought they could defeat us. I think now we are better prepared."

Accessing the port's computer deal

By Frederica Jansz 

The government may cancel the awarding of a US$ 9.4 million contract to a Japanese computer firm after Sri Lanka Ports Authority Chief (SLPA) insisted the deal is too expensive and unsuitable for the SLPA whilst at the same time identifying suitable suppliers.

A new computer terminal management system is to be purchased to service the Jaya Container Terminal (JCT) and the North Pier Development Project at the Colombo Port.

The new SLPA Chairman, Dileepa Wijeysundara has gone so far as to identify "suitable" suppliers, two of whom were disqualified at a pre-qualification stage by a Technical Evaluation Committee (TEC).

Condemning the supplier selected by a TEC and a Cabinet Appointed Tender Board (CATB) Wijeysundara maintains the UPFA government is to soon call for fresh bids, of which he says those who made offers previously will be requested to do so once again, and their bids re-evaluated.

Fresh tenders

Since Wijeysundara has already identified "suitable suppliers" it is not clear why the government is going ahead with the process of calling a fresh tender. Will this mean the already selected supplier will be immediately disqualified?

A full scale controversy erupted soon after Wijeysundara accepted the position of Chairman SLPA, following the April 2 general election. He has initiated a strong lobby, calling upon the government to cancel a contract already recommended and approved by a CATB.

Wijeysundara insists that the multi million dollar contract earmarked for award to Mitsui Engineering and Shipbuilding Company (MES) is over priced by at least US$ 2 million. Wijeysundara claims further that the IT system on offer by MES is inadequate and not the best in comparison with at least four other bids that were disqualified by a previous TEC.

The financial offer by MES costs an estimated Rs. 945 million (US$ 9.4 million). Monies for which are to be drawn out of an aid loan amounting to Rs. 1.3 billion (US$ 13 million) by the Japan Bank for International Cooperation (JBIC).


The tussle as to who should secure this lucrative deal and the controversy created by Wijeysundara has even compelled Chief Representative, JBIC in Colombo, Shafiya Ejima to write on October 8, 2004 to the Director General, External Resources Department, Finance Ministry. In this letter Ejima urges the Sri Lankan government to solve this issue amicably and probe "the possibility of negotiating with the selected applicants for a mutually beneficial solution to the issues now raised" by this government.

Wijeysundara charges that some previous members of the TEC who had raised objections to this contract being awarded to MES were pressured or removed from the committee in order to ensure that MES was selected. Wijeysundara maintains that the American based Navis Access International Joint Venture, Cosmos from Belgium and HPC/HHLA from Germany are more widely used in over "15 trans-shipment ports around the world" unlike the Japanese MES he said, which has experience of installing such systems in only two ports - Japan and Sri Lanka.

The three suppliers Wijeysundara has identified as being "more suitable" were among seven bidders who made offers when this tender was initially called in June 2003 by the previous UNF government.  However, two out of the three were disqualified at a pre-qualification stage.

TEC recommendations

The seven offers initially received by the UNF regime were from Navis LLC - Access International Venture, Mitsui Engineering & Shipbuilding Co., Japan, CMC - SSC India Joint Venture, Marubeni Corporation, Japan, Cosmos, Belgium, Tomen - Japan - JRC - Japan Joint Venture, HPC / HHLA - Germany and ICICI Infotech Joint Venture - India.

After having examined the bids, Navis - Access JV, CMC - SSC JV, Marubeni Corporation and ICICI JV were determined as failing to qualify with required criteria. The remaining three were recommended for acceptance. Bidding documents were then issued to the three pre-qualified applicants.

A TEC comprising of Deputy Chief Manager SLPA, U. K. D. A. A. Hemachandra, Chief Operations Manager SLPA, U. Bopitiya, Deputy Chief Engineer, SLPA, A. D. T. Gunasekera, Senior Systems Analyst SLPA, G. A. Dharmadasa and Director, Department of State Accounts, P.M.P. Fernando examined the applications.

TEC recommended to CATB to consider the bid of MES and open its financial proposal together with the concurrence of JBIC. The bidding process was conducted under new government guidelines using a "two envelope system." This involves the technical proposal being evaluated first and if accepted the financial proposal is opened.

Two bids

Following the recommendations of TEC, on December 15, 2003, the government accepted two bids and one withdrawal. M/s HPC/HHLA, Germany, one out of the three short-listed suppliers, informed their withdrawal from bidding.

The technical proposals of the two bids, MES and Cosmos NV, were opened and read out. The financial proposals were sealed and kept in the custody of the CATB.

The cabinet appointed tender board comprised of Tourism Ministry Secretary, Dr. P. Ramanujam, Additional Secretary, Tertiary Education Ministry, W. Ellawala and Additional Director General, Department of National Planning, M. Karunaratne.

On March 1, 2004, CATB granted permission to open the financial packages of MES. A date to do so was fixed for March 22.

The concurrence of JBIC was also obtained with regard to the technical proposal submitted by MES. The financial proposal was opened in the presence of the bidder's representatives and prices read out. On April 7, 2004 TEC submitted its report on the financial proposal to the CATB. The CATB approved and recommended that this contract be awarded to the Japanese owned Mitsui Engineering and Shipbuilding Company (MES).

Change of mind

In the meantime, the government changed and the UPFA came into office. The government decided to appoint new members to the CATB on May 25, 2004. As a result, Ports Ministry Secretary, A. Hewage, George Micheal and Sumith Amerasinghe took over as the new members.

When contacted Wijeysundara said, "there were serious irregularities, bias, and incorrect information," with regard to MES being selected.

On June 7 this year, Wijeysundara, wrote to Hewage informing him that with regard to the proposed computer system for the two port terminals he intends to appoint a project team to prepare fresh terms of reference (TOR). He states in this letter the proposed system by the "consultant appears to be lacking in meeting the present and future needs of a modern computer container terminal."

Wijeysundara told The Sunday Leader that "the Japanese consultant" was paid "far too much - by one million dollars" to submit a report for this project. "We should not forget or underestimate the talent we have in our country," Wijeysundara claimed, asserting "my engineers produced a very good TOR in four weeks which is far better than the TOR we had from the Japanese where we spent US$ 1 million."

Wijeysundara had to admit however that despite "the new CATB having been given all the facts in June this year it is yet to act and cancel the recommendations of the previous CATB," he said.

The SLPA Chief has however been more successful in his endeavours with the Strategic Enterprise Management Agency (SEMA). Wijeysundara said SEMA on the instructions "of Mano Tittawella has called for a cancellation" of the previous choice.

Right price

On October 11, Wijeysundara wrote to Special Advisor to the President, Mano Tittawella informing him a new TOR for this project has been produced. In this letter he advises Tittawella that negotiations with the selected party should be based on the JBIC loan being repaid within 10 years, which would include a grace period for the selected party to give a price based on the new TOR, for the party to propose a software package widely used in trans-shipment ports, that the SLPA would need a major savings on the package price and that supervision of the implementation to be supervised primarily by SLPA staff.

Wijeysundara adds, "Unless these conditions are met it is impossible to proceed with the selected party as we are keen to have the best system at the right price implemented at SLPA."

No basis

What is strange in this entire issue is that Wijeysundara has clearly identified a suitable supplier while condemning one already chosen by a TEC and a CATB. How fresh bids could in this context be entertained and evaluated without bias is a question that the new CATB will have to consider if it plans to act with transparency and integrity.

The allegations being made against the current SLPA Chairman, is that his attempt to cancel the previous decision to award the contract to MES is in order to ensure the multi million dollar award is given to Navis LLC - of Access International.

He in fact is on record telling this newspaper that Navis, one of the suppliers who made a bid previously was the most suitable to handle this project. Navis LLC - Access International at the time of prequalification, was disqualified by the TEC for failing to comply with pre qualification criteria.

According to the TEC report, Navis failed to prove it possessed an annual average turnover of at least US$ 40 million for the last five years. In a report to the chairman, CATB dated August 21, 2002, TEC wrote that Navis LLC - Access International's average turnover over the last five years is approximately US$ 30 million, which is less than US$ 10 million or 25% of the required value of US$ 40 million. Moreover, the company according to TEC did not attach evidence from general experience or demonstrate a cash flow capacity required for the successful execution of the project. The company in fact was unable to provide a satisfactory bank reference with regard to its financial position.

Guinea-pig status

But SLPA Chief Dileepa Wijeysundara discounts these concerns as being "irrelevant." He scoffed at the previous criteria which requested the chosen company to prove an average turnover of US$ 40 million over the last five years as being "totally unnecessary, merely to install an IT system at the port."

The SLPA meantime had also requested MES to extend their bid validity period for a further 90 days since the bid bond of MES was due to expire on May 11, 2004.

The controversy over the multi million dollar contract even prompted the US government to raise concerns. On September 23, 2003 Economic Officer, United States Embassy in Colombo, Teresa Manlowe wrote to Charitha Ratwatte, who was at the time secretary, Finance Ministry. In this letter, Manlowe draws Ratwatte's attention to a letter received by the embassy from Navis, an American company which she states "is seriously interested in the Port of Colombo Computer System Project." She asserts that at the time the US embassy received this letter from Navis, a company representative had briefed US officials "on some concerns they had about the tender process."

Manlowe reiterates that while the US government supports this US company's bid to pre-qualify, the US would also want Sri Lanka to get the best system for the port while ensuring "that there is an adequate number of competent competitors."

Wijeysundara meantime insists MES apart from lacking in required experience to install an IT system of this nature at a trans-shipment port like Colombo, also did not include an offer for a billing system. "How can you have a system without a billing module which is essential to our operations?" he asked, adding the SLPA "would become a guinea pig" as it would be forced to purchase a billing system later and incur additional costs.

Strange ways

"We are giving priority to the supplier who has a proven track record of the most number of installations in the world. Then we will have the confidence we are buying the right product. The other priority will obviously be to consider the turnover of the company as well - but more important is to take into account the number of installations and number of recent installations and also that the system is available for purchase off the shelf," Wijeysundara said, adding "Cosmos is also very good. You can buy a module off the shelf. So this is the whole thing behind this cancellation."

Wijeysundara denied he had any links to the Access Group, claiming he had worked overseas for the last 25 years before returning to Sri Lanka to accept this post.

We can only but wonder. Strange indeed, are the ways of man!

Dr. P. Ramanujam says.

Tourism Ministry Secretary, Dr. Prathap Ramanujam said at the time he sat as a member on the Cabinet Appointed Tender Board (CATB) to evaluate this contract, the CATB unanimously decided that Mitsui Engineering and Shipbuilding (MES) was the best offer both at a technical and financial level.

Dr. Ramanujam however said that thereafter the government changed and the new UPFA cabinet decided to call for fresh bids, rejecting the choice of the previous CATB and TEC.

Asked why the US embassy had also voiced some concern with regard to the manner in which this tender had been handled, Ramanujam asserted that the CATB did take into consideration Teresa Manlowe's letter, but reiterated, "we still did not find any reason to change the recommendations of TEC and our own observations." 

COPE questions SLPA Chief

The parliamentary Committee on Public Enterprises (COPE) recently summoned Dileepa Wijeysundara and questioned him in detail as to why he is insisting on cancelling a tender which had already received approval and recommendations by a CATB.

COPE members Ravi Karunanayake, Rohitha Bogollagama, Dilan Perera and Sripathy Sooriarachchi had vigorously quizzed Wijeysundara insisting he give adequate reason why he personally is seeking a cancellation of this contract to the Japanese firm when even the new CATB under the chairmanship of A. Hewage is yet to take a decision on the matter.

COPE has now called for a detailed report, reiterating no decision can be made until it studies thoroughly the charges put forward by Wijeysundara.

Vehicle tax takes toll on importers

By Jamila Najmuddin and Dharisha Bastians

The UPFA government's overnight decision to increase import duty on private vehicles has earned the ire of vehicle importers and sections of the public as being unfair and a further burden on middle income earning families in light of the escalating cost of living.

The Finance Ministry, which issued a communique removing the existing 25 percent duty on imported vehicles, replacing it with a three-tiered duty structure on October 14, has justified its move by saying it was aimed at reducing fuel consumption, saving foreign exchange and minimising damage to the environment.

However environmentalists who spoke to The Sunday Leader said it was too soon to say whether the increase in duty would have a direct bearing on the environment, adding that the move was not principally aimed at environmental protection, but additional revenue for the state coffers instead. (See box for details)

Meanwhile, officials at the Ports Authority speaking to The Sunday Leader on condition of anonymity said that currently a great many vehicles remained at the Colombo harbour awaiting clearance. The officials said that the backlog in vehicle clearance had become an issue since the government imposed the new duty structure.

Treasury Secretary, Dr. P.B. Jayasundara, explaining the government's rationale behind the introduction of the new tax structure, said that vehicle imports constituted 30 percent of the country's import revenue, a figure the government considered far too high. Dr. Jayasundara said that there were large numbers of vehicles entering the country annually and this system was introduced especially in a bid to reduce demand for petroleum products in the market which was having an adverse impact on the rupee and the exchange rates.

The Treasury Secretary was also quick to add that while the moves were not aimed at completely stopping imports of motor vehicles, the Ministry was hoping to curtail the number of vehicles entering the country by implementing the new tax scheme.

While government officials maintain that the new tax system will only affect the high income earning sections of society, car dealers argue that the middle class man's dream of owning a personal vehicle is now almost completely out of reach.

The new tax system imposes duties based on the size and engine capacity of the vehicle imported, with a 30% customs duty on vehicles with the engine capacity of less than 1 litre, 40% on mid size cars with engines upto 1.5 litres and 60% for even bigger cars, according to the Finance Ministry communique. The government's move to increase duty on motor vehicles, came amidst widespread speculation that the UPFA's maiden budget to be unveiled on November 18 too, would impose further hikes in customs and import duties.

With the new tax structure in place for the last two weeks, small and medium scale car dealers and importers have expressed fears that they would have to soon close up shop, since they were not only unable to sell the vehicles currently in their showrooms, but they also remained unable to clear vehicles ordered and stuck in the harbour awaiting clearance because of a severe shortage of funds.

"Government mixing up economic priorities" - economist

Speaking to The Sunday Leader, Principal Researcher, Point Pedro Institute of Development, Dr. Muttukrishna Sarvananthan said this government appears to be mixing up economic policy priorities.

Sarvananthan said that while he could understand the reason for raising the vehicle import tax by the government in order to reduce the number of vehicle imports, save foreign exchange which is fast depleting as a result of soaring world oil prices and the inability to get adequate foreign aid, the downside was that lesser vehicle imports meant lesser government revenue by way of import duty, VAT and excise duty.

"Although the government may be saving foreign exchange as a result of reduction in vehicle imports, at the same time it will also lose valuable tax revenue which is critically needed. Moreover, higher import tax would also spur greater undervaluation of vehicle imports which would in turn reduce tax revenue due to the govt. An indirect effect of this would be heightened bribery and corruption at the customs," Sarvananthan noted.

Suggesting an alternative method to reduce vehicle imports, Sarvananthan said that the government should charge the full cost of petrol, diesel and kerosene to the customers, instead of subsidising fuel, which would in turn reduce the use of private vehicles. "This way government can achieve  two objectives/benefits out of one policy measure. Selling petroleum products at world market prices would reduce vehicle imports (particularly private cars) thereby  saving foreign exchange, and save the government the  fuel subsidy which is said to be about Rs.600 million a month," he said.

He added that while it was natural that vehicle dealers will pass on the increase in import tax to the customers, it was far-fetched to believe that this increase would hurt the common man. "It is car imports that are mostly affected by the increase in import duty and cars cannot be termed a common man's mode of transport," Sarvananthan said.

Car dealers complain

With car dealers eager to voice their opinion, The Sunday Leader visited many 'sales' in the city and while a few have already been forced to close their showrooms due to the lack of sales, others claim that they wait eagerly each day for customers to purchase vehicles in order to clear the new vehicles which have already arrived at the Colombo harbour but remain there due to the lack of money to clear these vehicles.

Media Consultant, Motor Vehicles Association, Siramasiri Happuarachchi :

The increase in import duty of vehicles does not only affect the importers. A lot of people depend on this industry as there are over a 1000 people employed in this field and this increase will affect them as well. A certain section of society earns a living by importing vehicles from abroad.

The finance minister claims that this increase will not affect middle class society. How can it now? This increase affects prices of non-luxury cars as well and it is the normal and semi-luxury cars that the middle class can afford to purchase.

The government has decided to increase the tax since they are completely bankrupt. Due to this, importers are not going to import vehicles anymore. How long is the government going to run the country in this manner? With the high cost of living how does the government expect us to pay such high taxes? We can only pay if the customers buy vehicles from us. Before the government declared this increase, we used to sell atleast 25 to 30 vehicles per month. However, since the day of the increase we have not been able to sell even one vehicle and our showrooms are deserted. Business is running at a loss.

The government is under the impression that people who deal in importing cars are all millionaires. This is not true because a lot of importers remain in business by taking loans from the banks.

The association has decided that we will discuss this matter further. Due to this we have asked for discussions with the finance minister and the President. We are giving the government a period of two weeks and within this time frame if the government does not reach a decision, we will summon all the motor vehicle dealers in the island and hold a massive protest campaign in Colombo. Even after that if the government does not reconsider we will stop the import of vehicles to this country completely.

An official from Ishara Traders, Colombo:

Since the day the government increased the taxes, we have not been able to sell even one vehicle. How are we going to sell when yesterday a vehicle which was available for Rs. 1.2 million is now sold at Rs. 1.8 million? People are not foolish to purchase vehicles at these prices.

Even though our showrooms are open, we do not have any sales. Nobody comes to purchase vehicles anymore. Earlier for a vehicle costing Rs. 1 million we had to pay 2. 4 million with tax. However, now we have to pay 3.1 million for the same vehicle.

Why haven't dealers been able to clear their vehicles from the customs? To clear those vehicles we will have to sell all our existing vehicles at the new prices and nobody is willing to buy. We have had to increase the prices of all our old vehicles by Rs. 300,000.

The government says one thing and does something else. Now rather than stopping imports, it is better for the government to broaden the roads. The UPFA has not taken into consideration the plight of the business community.

Chairman, Vehicle Importers Association, Pushpakumara Piyasena:

Due to the increas in import duty, the entire motor vehicle industry in the island will collapse. This is something that we had never expected and we cannot bear such a high increase. We have imported a large number of vehicles and to clear all these vehicles we need a large amount of money. To gather these amounts, we have no choice but to increase the prices of all our old vehicles to the new prices. Due to this we have no sales and are facing severe losses.

However, we cannot decide what the future holds for us as the government has not reached a final decision as yet. It is not only millionaires that depend on this industry. Today dealers keep a profit of only 2% to 3%. Now due to this increase, we will lose even that minimal profit.

We have requested the authorities in charge to refrain from applying this tax on vehicles that arrive at the port within the next 14 days. This is an unjust and unfair decision by the government. We hope to hold discussions with the minister and the President in the coming weeks.

"This move was not for the benefit of the environment"

The Sunday Leader also spoke to Environmentalist, Jagath Gunewardene, about the benefits a reduction in the number of vehicles entering the country would entail for the environment. Gunewardane said that although there currently was congestion, "we cannot refer to this decision as an environmental friendly move as the government has taken these steps to increase their income rather than to cut down on air pollution."

"There are other direct methods that the government can apply to reduce air pollution, including the ban on old vehicles that emit toxic fumes plying the roads. The increase of import duties will only further affect the middle and lower middle classes. It is too early to congratulate the government claiming the move is beneficial to the environment as we will have to wait and see whether the curtailment of vehicles on the roads will finally impact air pollution. 

Rice and sugar deals raise eyebrows

Jeyaraj Fernandopulle and Chairman, CWE, Upali Gunaratne

By Frederica Jansz 

Questions are being raised both here and abroad over Sri Lanka's import of rice and sugar. The role of Commerce and Consumer Affairs Minister Jeyaraj Fernandopulle is being queried following import deals signed by the government with Pakistani rice exporters and a Bharain company to import sugar outside tender procedure. Both commodities are being bought at extremely low prices causing concerns among Pakistani exporters and Lankan traders.

Apart from the commodities being bought at unbelievably low rates no tender procedures have been followed. Instead, the suppliers have been independently identified by the Consumer Affairs Ministry. With regard to the sugar imports Chairman, Mushin Traders, Indrajith Joseph told The Sunday Leader "I am doing this only for the honourable minister, not for anybody else," when quizzed on how he is bringing down sugar at such a low rate. (See box)

Raising questions

Meanwhile, a rice deal signed by the government for the import of 2,000 tonnes of basmati rice and 2,000 tonnes of white raw rice from a Pakistani exporter has raised several questions due to the extremely low price.

A leading Pakistani exporter clinched the deal for 2,000 tonnes of basmati rice at the rate of US$ 350 per tonne duty free to Colombo. Also, for 2,000 tonnes of white raw rice (irri) at the rate of US$ 250 per tonne to Colombo. The very low rates have raised questions in Pakistan as other exporters have said the rice deal at such a low price may hurt exports in addition to questions over quality.

Last year, the average price for super basmati was over US$ 525 per tonne and around US$ 480 for the 385 variety of basmati - the only two known varieties grown in Pakistan.

Concern in Pakistan

Therefore, the rate of US$ 350 per tonne to Colombo for pure basmati, exporters say, is not possible. Fears are being expressed that the Pakistani exporter maybe dispatching a blended variety to Sri Lanka which would finally result in tarnishing the entire exports of basmati rice for Pakistan. Chairman, CWE, Upali Gunaratne however insists that 500 metric tonnes of basmati received from Pakistan so far have not been blended, but is pure basmati.

Nevertheless, serious concerns are being voiced in Pakistan that the rice deal to Sri Lanka would bring down the prices of basmati variety globally. For instance other importers of Pakistani rice like Oman and Mauritius may now feel they have been cheated and also demand Pakistan sell basmati and white rice to them at the same low rates as it has done to Sri Lanka.

Refusing to comply

To facilitate this order, Ministry Secretary, S. Wirithamulla personally visited India and Pakistan to inspect the rice. Wirithamulla later instructed CWE Chief Gunaratne to purchase 25,000 tonnes of sugar from Brazil - also at an unbelievably low rate of only US$ 197 per tonne when the going rate is at least US$ 100 more. If the sugar does arrive in Sri Lanka the government will be in a position to sell a kilo of sugar at a nominal Rs. 25. If this is the challenge Fernandopulle has set himself the country would certainly like to see him meet it.

Gunaratne meantime as we reported last week has refused to comply with the Ministry directive to buy this sugar from a favoured supplier, namely Indrajith Joseph who was selected by Fernandopulle bypassing tender procedure. Joseph is the local agent for a company based in Bahrain which goes under the name, M/s Kingdom Trading International based at 55th Floor, Dauhi Building, Municipality Building, Manama, Kingdom of Bahrain.

Difficult to sell

Joseph is chairman and managing director, Mushin Traders as well as Ace Holiday Lanka (Pvt) Ltd., which is located at Colombo 8. Gunaratne took a firm stand on the issue after Wirithamulla wrote to him telling him he must buy 25,000 metric tonnes of sugar from Mushin Traders at US$ 197 per tonne. Gunaratne's bone of contention is that when the contract was forwarded to him for signing he found a clause stipulating the sugar can only be inspected at the point of loading and not at the port of discharge. A load port survey is usually conducted before and after items are sent and received in order to make certain, before payment is made, they do not carry a shortfall or are in violation of the specifications stipulated.

Determined to ensure the transaction is fool-proof Gunaratne said he has now written to the Kuwait Embassy seeking "feedback" on the sugar supplier based in Bahrain. The CWE Chief further asserted that any sugar exporter registered with the London Sugar Refinery Association would not be in a position to sell sugar at this rate.

Gunaratne was unable to explain why and how the ministry has purchased both rice and sugar internationally at such low rates. "I don't know" he said confirming however that in both cases, the consignments have been bought for prices less than US$ 100 and in the case of basmati rice less than US$ 200 per tonne.

The CWE Chief also admitted that in the case of white raw rice purchased from Pakistan the government has been "finding it difficult to sell" due to available quantities of white rice already in the market. Since basmati rice constitutes part of a rich man's diet it remains to be seen how effectively the CWE will be able to market this product.

Deafening silence

Gunaratne meantime is also battling trade union leaders at the CWE. He said some 500 employees at the CWE "have nothing to do" following the closure of wholesale outlets. Salaries of all CWE employees Gunaratne maintained are paid from Treasury funds and as a result causing a huge burden on the government. "Only 150 people" Gunaratne said are currently required to serve any purpose within the CWE. "The government will soon have to take a decision," he asserted.

One can only wonder why the JVP, in particular Wimal Weerawansa, Sunil Handunnetti, and the PA's Mahindananda Aluthgamage who were vociferous critics during the previous regime on the import of rice are today silent. Surely these men, two of whom are presently deputy ministers should be raising the matter and asking the same questions they raised before? Not only has the Consumer Affairs Ministry bypassed tender procedure, but also ignored local traders. Shouldn't the JVP be referring to the 'Blue Book' prepared by President Chandrika Kumaratunga detailing guidelines on government procurement which Kumaratunga insisted the UNF too must follow?

These men have previously waxed eloquent on state and private television insisting such imports must be transparent. Why they are now silent in the face of such a blatant lack of transparency and accountability is a matter for this nation to now be judge and jury.

"I'm doing this purely for the Minister" 

Chairman, Mushin Traders, Indrajith Joseph when asked how he is selling sugar at US$ 100 less than market prices said, "I am doing this for the honourable minister, not for anybody else."

He asserted that he has also not insisted on the government opening a Letter of Credit as is the norm, but has agreed the Ministry will pay him only after the consignment reaches the port of Colombo.

"No trader can give that facility - it is always a risk - as the government can backout after the goods arrive," he said. Asked why he is prepared to take this risk, Joseph replied, "I do it only because of the Minister. He is trying to bring down prices and so I must assist him."

Unexpected ally

Minister Anura Kumara Dissanayake had submitted a cabinet paper pertaining to a scheme to recruit agriculture graduates to various ministries. The cabinet paper detailed how these graduates could be integrated not only into the Ministry of Agriculture but also to several other state organs.

Finance Minister, Sarath Amunugama from the time he saw the cabinet paper, appeared to be fairly displeased with its recommendations. The first question about the recommendations therefore, came from Amunugama himself at the cabinet meeting.

Quite forgetting the contents of his own cabinet paper on the foreign funded projects debated on so hotly only a short while ago, Dr. Amunugama asked Minister Dissanayake how exactly he saw fit to make decisions about the recruitment of graduates to ministries not assigned to him.

Dissanayake replied that he was not attempting to force or influence other ministries by his cabinet paper, but merely detailing the procedural guidelines under which agriculture graduates could be integrated into other sectors. Not satisfied with this response Amunugama took the issue further, finally practically giving Dissanayake a lecture on how a cabinet paper had to be presented.

Unexpectedly, it was President Chandrika Kumaratunga who intervened. "Anura is right. As the Minister in Charge, he has a right to submit his recommendations," she said, even going on to advise Dissanayake to re-submit the paper as a basis for the recruitment of graduates. 


Premier accuses Prez

The cabinet meeting last week saw a battle between the President and the Prime Minister.

Prime Minister Rajapakse expressed his displeasure about the fact that President Chandrika Kumaratunga had dissolved the board of directors of the E-Sri Lanka Project. The Premier charged that Kumaratunga was interfering with a subject that came under his ministerial purview. But the President maintained that the project came under her jurisdiction.

"I've told you this for a long time now. That is my subject. It has been assigned to you by mistake," the President explained.

But the Premier insisted that when former Prime Minister Ranil Wickremesinghe was in office, the project had been carried out under him and went on to ask whether the President, being caught up the way she was with so many other responsibilities, needed to concern herself with yet another matter.

Responding to this, President Chandrika Kumaratunga pointed out that the Prime Minister already had to contend with the responsibility of the Highways Ministry into which state organ massive amounts of funds were being channelled. But Rajapakse replied that only 11,000 kilometers came within his jurisdiction and did not include roadways all over Sri Lanka.

"I don't count the kilometers when I assign ministries. If you do as I say, there will be enough and more money," shot back Kumaratunga.

Not content with this reply from the President, Rajapakse said: "I don't know about all that. All I am saying is don't try to interfere with my ministries. If you want to appoint someone to a particular post, we can talk about it and reach some kind of compromise arrangement. We don't have to discuss it here, we can do it privately."

The cabinet of ministers listened to this exchange with some amusement. But since the President said that the matter could be discussed later, the tension was eased somewhat. 

Monk issue

Rumours were rampant in the political arena last week that a deputy minister was engaged in an attempt to get JHU General Secretary, Ven. Uduwe Dhammaloka Thero to cross over to government ranks by threatening and intimidating the monk. The deputy minister had shown the monk a tape and threatened him with it, the story went.

The rumours made the main opposition United National Party (UNP) look into the issue. The opposition was of the view that if indeed there was a plot afoot to intimidate the monk into supporting the government, it should be looked into immediately and prevented.

Accordingly, several senior UNPers met with the Thero last week and asked him to confide in them if he was facing any such problems. They told the Thero that if the government was indeed engaged in an attempt to intimidate a member of the clergy into supporting it, the people of the country could be kept informed. However, the monk maintained that he had been subject to no such threats or intimidation of any kind. 


UNP's battle lines

The UNP political affairs committee meeting on last Monday, October 25, was a stormy affair. After Colombo District MP Bandula Gunewardena raised the issue of Milinda Moragoda's Gamin Gamata programme (See Inside Politics, page 11) invited for discussion was former Minister of Commerce, Ravi Karunanayake.

Present at the meeting of the Political Affairs Committee were UNP Leader Ranil Wickremesinghe, Karu Jayasuriya, Professor G. L. Peiris, Jayawickrema Perera, John Amaratunga, Lakshman Seneviratne, Tissa Attanayake, Kabir Hashim, Malik Samarawickrema and N. K. Weragoda.

The committee took up three motions Karunanayake had given notice of in parliament. First was the scrapping of the pension scheme for parliamentarians. Karunanayake took up the position that though the JVP was trying to move the motion and take the credit for it, it was he who had first taken up the issue.

Karunanayake pointed out that the public wanted to see radical action taken by the party and was also not in favour of a pension scheme for MPs, hence the motion. But Wickremesinghe was not in agreement saying that the UNP policy was to provide MPs with a pension and this had been so since the time of former President J. R. Jayewardene.

On being told that it was party policy, Karunanayake referred to a statement made by Kalutara District MP Mahinda Samarasinghe during a TV programme sometime earlier to the effect that he was for the abolition of the executive presidency when party policy was otherwise. However, Wickremesinghe said that even on that issue, party policy was clear and everybody had to fall in line with it.

Coming back to the pension issue, Wickremesinghe said that Jayewardene had been insistent that MPs should be provided with a pension facility after they retire. "In fact President Jayewardene and I, though not in need of a pension or the salary paid to MPs always decided to take it and not even give it to a fund as some people are doing to set an example for MPs to depend on their salaries as their source of income. That is party policy," Wickremesinghe reasserted.

Karunanayake however continued to argue that public expectation was otherwise. But eventually the political affairs committee decided that party policy would have to be adhered to on this issue.

The next issue to be taken up was a motion by Karunanayake to increase the fine of Rs. 500,000 imposed on persons giving false information to the Bribery Commission to Rs. 5 million.

Here again, the PAC said it has to be decided whether this was the opportune time to take up the issue since it would lead to a mud slinging campaign rather than the substantive issues being taken up.

Karunanayake however was insistent saying he was being vicitimised with false allegations and wanted to clear his name. "I have no problem in defending my position. I welcome the opportunity of confronting all the issues. I should be allowed to debate the motion to clear my name." Finally, Wickremesinghe said he would take a decision on the matter in consultation with the committee and inform Karunanayake in due course.

Not long after, the UNP trade union leaders, including Gamini Lokuge, Rajitha Senaratne, Rohitha Bogollagama, Sirinal De Mel, Raja Seneviratne among others were called in to discuss their activities.

At the outset, Wickreme-singhe took up the issue of letters being circulated to members of the political affairs committee and cautioned against it, stating that such letters in future should be addressed directly to him. Wickremesinghe went on to say that he would then decide whether such letters need to be discussed at the committee or not when it comes to organisational matters.

At this point, Rajitha Senaratne referring to the incident last week where a letter of his was circulated among the committee said that he never wanted his letter to be circulated but had only given the copies addressed to the party leader to Assistant Secretary, Tissa Attanayake to take a decision on circulation. It was pointed out by Attanayake however at this juncture that he circulated the letter because it was addressed to the committee as well, through the party leader.

But Senaratne had another battle to fight. He charged that everything that had been discussed at the committee meeting had appeared in the press. He went on to say that he had heard from The Sunday Leader that it was Mahinda Samarasinghe who had given this information.

Taking umbrage at this allegation, Samarasinghe denied it adding that Kalutara issues should not be raised in that forum. But Senaratne did not let go, saying that talking of Kalutara issues, Samarasinghe had told the newspapers he was not leaving the Kalutara District and going to Colombo, but that Malik Samarawickrema had informed him that Samaraesinghe wanted to contest from Colombo.

Samarawickrema however said that he had made no such statement. In an attempt to defuse the verbal battle, Wickremesinghe said that they should discuss matters pertaining to the trade union movement and not deviate.

But this time, Samarasinghe refused to let the issue go, insisting he be given an opportunity to clear his name. He said "The Sunday Leader can be asked in everyone's presence whether he had anything to do with the information published," adding that he was challenging Senaratne to do so.

But Senaratne was equally insistent saying that Karunanayake had given him that information a short while back.

However, Samarasinghe strongly denied the charge, insisting that the Leader be asked whether this was in fact so and asked Senaratne not to attempt to take cheap political advantage by making such allegations.

Finally, Wickemesinghe intervened and advised both members to stop the exchange of words and to focus on trade union activities, which they then proceeded to do.

At a subsequent meeting on Wednesday, Wickre-mesinghe had informed the committee that he had made his own inquiries with regard to the source of the leak and learnt that Samarasinghe had nothing to do with what was published in the Leader.


Hitching a ride

This is the 10th year Chandrika Kumara-tunga has served as Head of State and President of Sri Lanka. The SLFP has decided to organise a series of ceremonies to mark this decade.

The series has been titled 'Battle for Development' and commenced in Anuradhapura. But the JVP ministers had problems with the ceremonies because it appeared that the party had been totally left out of the programme and only invited for the ceremony. So the JVP MPs had decided at an unofficial level not to attend the opening ceremony in Anuradhapura.

The letter from President Chandrika Kumaratunga asking Minister Anura Kumara Dissanayake to explain why he made remarks against Minister Sirisena at Matale within a period of a week had also been given to Dissanayake the day of the opening ceremony.

As usual, the crisis was discussed between Minister Dissanayake, JVP Propaganda Secretary, Wimal Weerawansa and Ports Minister, Mangala Samaraweera.

As a result of the discussions, Minister Dissanayake attended the opening ceremony in Anuradhapura the next day. He travelled to the site of the ceremony in Minister Samaraweera's vehicle.

When religious ceremonies were held at the Sri Maha Bodhi, Minister Dissanayake went there too with Samaraweera. But at the sacred temple, it was obvious that Dissanayake was having some trouble facing the President and tried to remain inconspicuous and away from Kumaratunga's sight throughout the ceremony.

He behaved the same way during the opening of a new provincial council building in the area. Having noticed Dissanayake's behaviour during the ceremonies, President Kumaratunga turned to Samaraweera and said "Is Anura hiding in corners because he is scared? People will notice. Tell him to stop being silly and come in front and sit with us!"

Ever ready to oblige, Samaraweera proceeded to take Dissanayake's hand and lead him to a chair in one of the front rows. Soon afterwards, the crowd moved towards the public grounds where Minister Sirisena too was to sit on the main podium.

But Dissanayake took his seat in a back row. Seeing this, Kumaratunga called out to the JVP Minister, saying, "Why are you hiding in corners? You are also a minister. Come and sit in front." Dissanayake humbly walked up and took his seat.

Given the fact that Minister Lalkantha is extremely popular in the Anuradhapura area, his absence at the ceremonies was conspicuous. Many people present were heard to mumble that it indicated the rift between the newly appointed 'ministers' and those who remained 'comrades' within the JVP.


Battling CoL

The cabinet meeting went on till about 10:30 that night. The cost of living also came up for intense discussion during the meeting, with the President suggesting that the prices of essential items should be controlled through the cooperative system.

But several ministers felt these moves would prove futile, since there were no cooperative outlets in urban areas. But the President disagreed. "The people in Colombo don't have a problem. It is the people in villages who can't cope with the prices. Find ways to develop the cooperative system. We need to stregthen this system," she asserted.

The President's plan received cabinet approval.


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