No moral right to play with public funds

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By 2017-04-10

By NiranjalaAriyawansha

Anti-Corruption Front (ACF) accused last week that Sri Lanka had again incurred a loss of Rs. 1.953 billion due to the tender awarded to Swiss Singapore Overseas Enterprises Pvt. Ltd. Company to supply coal to Norochcholai Lakvijaya Coal Power Plant from January 2017 to 31 March 2017.

They said that the Ministry of Power and Renewable Energy had offered this tender in violation of the order of the Supreme Court that awarding this tender to Swill Singapore Company was illegal.

They pointed out that the cause for the loss is paying US$ 13.75 per metric tonne over value, compared to the current price of coal in the world market, to the Swiss Singapore Company vis-à-vis the companies which supply coal on spot tenders.

Anti-Corruption Front argues that coal could be purchased at US$ 13.75 less per metric tonne if it was purchased on spot tenders instead of long term purchase from Swiss Singapore Company.

The value of a metric tonne of coal purchased from Swiss Singapore Company is US$ 91.75. But the price of Adani Global for coal is US$ 78 per metric tonne on spot tenders. Thus the government has paid US$ 13.75 in excess to Swiss Singapore per each ton of coal, Anti-Corruption Front argues.

They argue that the Secretary of the Ministry of Power and Renewable Energy Dr. Suren Batagoda is totally responsible for the loss incurred by the State.

However, Dr. Batagoda argued that the purchasing was in line with a policy decision taken after the good governance government came to power and it had not caused any loss. He pointed out that the price of coal in the world market had been decided by the New Castle Index but the fluctuations in the index had not been related to the long term contract offered to Swiss Singapore Company. "But spot tender prices fluctuate. We have now offered eight spot tenders and one long term tender. The prices of the spot tenders have fluctuated like 49, 50, 52, 55, 64, 80 and 94 from time to time. We knew that we could have eight prices in the eight spot tenders. But the new government took a decision regarding sustainability of power supply and accordingly it was decided that the coal supply of Norochcholai should be maintained without any shortage because it was the source of 50% of the power supply to the national grid. In this context, we cannot outline the difference between long term tenders and the spot tenders as loss or profit," Dr. Batagoda told Ceylon Today.

The tender to purchase coal for the Norochcholai Lakvijaya Coal Power Plant was first awarded in 2009. It was no secret that all the contracts offered after that had not gone under a proper tender procedure and they had been highly corrupt. Until 2015, the supply contract had been offered to Noble Resources Pvt. Ltd.They had the monopoly of coal supply to Sri Lanka from 2009 to 2015.

Streamlined coal tender procedure

"We streamlined the coal tender procedure after the new government came to power. Accordingly, we divided the procedure of purchase of coal as long term and short term spot tenders. Therefore, now 17 coal suppliers have registered under the Ministry of Power and Renewable Energy," Dr. Batagoda pointed out.

Lakvijaya Coal Power Plant in Norochcholai needs 225,000 metric tonnes of coal annually. After the new government came to power, Ministry of Power and Renewable Energy offered coal tenders from September 2015 to April 2016 and from September 2016 to April 2017 (for two seasons).

Long term contract for coal supply has been given to Swiss Singapore Company whereas spot tenders have been provided to Liberty Commodities Ltd. and Adani Global Pvt. Ltd. According to Dr. Batagoda, the long term and spot tenderers must provide half of the coal needs each. He points out that this system will save the country from shortage of coal supplies.

As he said, the other important result was that the monopoly in coal supply which prevailed since the first tender for coal had been broken now.

Noble Resources Company failed to continue supply of coal to Sri Lanka owing to a ban imposed by Indonesia due to a tax issue.

The Ceylon Electricity Board (CEB) had to stop Norochcholai coal power plant thrice due to shortage of coal. On that pretext, the government had to purchase power at high rates from the private diesel plants. Dr. Batagoda pointed out that all these reasons were behind the policy decision of the government.

After the new government came to power, the first long term coal supply tender was awarded to Swiss Singapore Overseas Enterprise Pvt. Ltd. Noble Resources Company filed a Fundamental Rights (FR) petition in the Supreme Court arguing that they had not been offered the tender although they had bid less. The company argued that the loss incurred due to this tender was Rs 1.2 billion.

Despite the fact that the Supreme Court dismissed the case due to technical reasons, the Court advised that it would be 'appropriate to' terminate the contract entered into with Swiss Singapore Overseas Enterprises Pvt. Ltd. for the supply of coal to the Lakvijaya coal power plant after giving 'reasonable' notice and to call for fresh bids in terms of the law, for the supply of coal for the said power plant following competitive bidding procedure.

However, former Chairman of Lanka Coal Company, Maithri Gunaratne pointed out that the Rs 1.953 billion loss was incurred by Sri Lanka because the Ministry of Power and Renewable Energy had offered the contract to Swiss Singapore Overseas Enterprises Pvt. Ltd ignoring the Court Order.

Gunaratne accused that it was due to the personal interest of Dr. Batagoda who Gunaratne accused of being an agent of Swiss Singapore Company.

Dr. Batagoda rejected the charge and retorted that Gunaratne had wanted to offer the tender to Noble Resources Company in which he was a director. But Gunaratne rejected the charge stating that he had no relationship with Noble Resources Company.

However, if the procurement process does not occur transparently, it is not possible to prevent serious allegations being leveled against the procurement of coal and other supplies by the State. The tender procedure is so complicated that the general public cannot understand it. Manipulating this complexity, various parties play for their gains accusing each other. No one can understand easily who is correct because the play is very complicated. However, no one has moral right to play with public funds.

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