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Continuing saga of Mihin


Minister Chamal Rajapakse
and  Sajin Vass Gunawardena

By Ranjith Jayasundera

Mihin Lanka's very existence appears to serve little purpose other than to massage the ego of President Mahinda Rajapakse and much more possibly ofhis coordinating Secretary Sajin Vass Gunawardena. Anyone would be proud to have an aircraft named after him, but to have named after you an airline with no aircraft is, to say the least, telling.

The airline has been in negotiations to obtain an Airbus aircraft that has been languishing in storage after being given up to its lessor by LTE International Airways in April 2008. Despite Sajin Vass Gunawardena's many trips to Europe to try to find an aircraft under 15 years old, he ended up having to settle for this old Airbus A320-200, whose first flight was 19 years ago on November 21, 1989.

The aircraft was delivered to Royal Jordanian Airlines on April 4, 1990, who in turn sold it in December 2006 to a finance company. The plane was then delivered to LTE International on June 11, 2007, and this airline operated it for barely a year before handing it back to its owner in April 2008, leaving it ripe for the picking of Mihin Lanka's agents, who were so desperate for an aircraft that they would accept anything that came their way.

Laughing stock

Airline sources in Europe say that Mihin was the "laughing stock" of that continent's aviation industry. In fact, The Sunday Leader came across some hard evidence of Sajin Vass' dealings in Europe that not only have legal ramifications but could throw more light into the steady losses of Mihin.

This evidence we will withhold for the moment due to apprehension that it will not lead to any concrete follow up action being taken. However if President Mahinda Rajapakse is to personally give an assurance that an independent and impartial inquiry will be launched into the material available, we would be delighted to place the evidence before him.

However, even this process is stalled as Mihin has informed the aircraft's owner that it is having trouble getting the money for its lease released from the Aviation Ministry. That is something of a tall tale, as The Sunday Leader reliably learns that the Treasury has this year released a total of Rs. 350 million to Mihin Lanka, out of which a mere Rs. 50 million has been spent on trying to placate the Ceylon Petroleum Corporation (CPC), to which Mihin yet owes a colossal Rs. 645 million.

A settlement of sorts

The CPC has, however, backed down on its earlier stance that it would not provide a drop of fuel to Mihin unless its account was settled in full. CPC Chairman Asantha De Mel confirmed that the CPC is still not supplying fuel to Mihin, but hinted that a settlement of sorts is in the offing. He said that a decision on whether to supply fuel to Mihin (and whether it would be on credit or cash-on-delivery) would be based on "the payment plan presented by Mihin." He did not rule out providing the dead airline fuel on credit even if it does not pay it dues in full. "They have to settle at least some part of the account," the chairman said.

The CPC is by no means the only state body with which Mihin Lanka is dancing the jig. The Board of Investment, Bank of Ceylon, Lankaputhra Bank and Airport and Aviation Services Limited have all been victims of Mihin Lanka's scandals.

The BoI agreement signed by Mihin Chairman Gotabaya Rajapakse required the company to invest a minimum US$ 100 million by October 2008, in exchange for which Mihin has not had to pay a drop of income tax since it came into existence.

Fall from the sky

Whether it is realistic to expect Rs. 10 billion in 'investment' to fall from the sky for Mihin is anyone's guess, given that so far the only 'investments' have been debt to the CPC (Rs. 0.7 billion), loans from Lankaputhra bank (Rs. 0.5 billion), overdrafts from the Bank of Ceylon (Rs. 1.1 billion) and cash infusions from the treasury (Rs. 0.85 billion and counting.)

Realistically it is these institutions that should have benefited from some tax holiday or treat as it is they who have been funding Mihin Lanka from its inception. Another requirement from the BoI that has been forgotten about is clause (5) of the agreement, which states that "machinery and equipment to be used" for Mihin "shall be new."

No loophole here for slipping in an ageing 20 year old Airbus at state expense, as the clause continues that "used machinery/equipment" can only be imported if a valid surveyor's certificate is furnished to the BoI before the equipment is imported, "certifying the quality and value thereof."

Ground handling equipment

Mihin is incurring rent bills of US$ 200,000 per month (Rs. 28 million per year) on languishing ground handling equipment, which it will either have to get rid of or put to good use. Should it tread on the toes of SriLankan Airlines' ground handling operations however, Mihin would be jeopardising its own efforts to piggyback on the 'real' national carrier.

The fact that nearly half of Sri Lankan Airlines' pilots have fled for fear of the national airline being taken over by Mihin among their reasons, gives a good indication of the fate of Sri Lanka's aviation industry should Mihin Lanka's splurge be allowed to continue unchecked.

Aviation Minister Chamal Rajapakse has it is reported taken the first step towards restoring sanity by dismissing CEO Sajin Vass Gunawardena who has been responsible for this mess from the very outset. He should now tell the public the reality behind how he plans to bring back all the money lost by Mihin, and answer the real question: where have all these billions of rupees actually gone?

 


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