By Kumar David –

Prof. Kumar David

Ministers acting like headless chickens and/or crooked shysters;  Mangala and Malik: Shady or Senseless?

No reasonable person will accuse this column of a pro-Rajapaksa or pro-SLPP bias, I am on record calling them financially corrupt proto-fascists. But it is not possible to refrain from calling a spade a spade, and when necessary a bloody shovel. This government is so adept at self-destruction that it no longer needs an opposition. A public outcry and trade union action by Customs personnel forced Finance Minister Mangala Samaraweera and the Cabinet to tuck their tails between their legs and reinstate Mrs. Sarojini Charles, Director General of Customs. But as we have little knowledge of what really happened the public must assume the worst; rogues to the right of us, rogues to the left of us, inept and insane, they volley and thunder. An exemplary public servant of high integrity, on the tail of crooked businessmen and smugglers with high political connections, she is the kind of person much needed in public life; Samaraweera to judge by his somersaults on this occasion is not.

This column has often spoken well of Samaraweera, his broadminded attitudes and his sensible approach to Sinhala-Tamil problems. Up to now I have had no reason to doubt his financial integrity. But what now? Was Mrs. Charles sidelined to scuttle investigations she was spearheading against smugglers and corrupt businessmen? What’s in it for him? One version is that high officials in the Finance Ministry were on the take, but can officials trigger a huge crisis unless the Minister gave them a nod and a wink? Or are there bigger fish and the Minister a mere (but ready and willing) cog in the wheel? The last question arises because the whole blithering Cabinet partook in the decision to dump Mrs. Charles. The electronic media carry stories about which businesses and smugglers are likely being protected by Minister, Cabinet or people higher up.

And curiously, why has the lady been reinstated for three months only? Is it reckoned that the miscreants can endure pressure for a short period and then laugh all the way to the bank after bequeathing their ‘hard-earned’ share to their political overlords? The public must insist that Mrs. Charles’ reappointment has no time limit other than her normal retirement from the public service. Temporary “reinstatement” is a pyrrhic victory, a sham.

After the stink he created Samaraweera had the gall to shower Mrs. Charles with praise upon her reinstatement. He expressed “Full confidence in her abilities to bring the business mafia operating in the Port to book; she is an iron lady.” Is this man who fired her now suffering from schizophrenia? Does politics dive its practitioners to insanity? And he went on to say: “I saw that even for her who faced Prabhakaran fearlessly the Mafia in the Ports was a challenge. That is why I decided to take her into the Ministry and appoint a former Navy Officer”. The Minister should go tell this to the Marines! Does he think we were all born yesterday? And a sailor with a background in gunboats, however competent at that job he may have been but without experience in the Public Service and without the support of Customs personnel would be a gift to the crooks.

Samaraweera has acted in bad faith in: (a) removing Mrs. Charles, (b) his hypocritical adlib when reinstating her which surely snarled his tongue in knots, and (c) worst of all, reinstating her for the shortest possible time merely to placate howls of protest. He has fallen under a pall of suspicion for which he has none but himself to blame.

Gigantic blunders loom in the power sector

Two issues undermine the electric power (CEB) expansion outlook; hence there will be power shortages and a spike in the price at which the CEB is compelled to buy electricity from private power producers for resale to consumers. The issues are the proposed Kerawalpitiya 300MW gas-fired plant and the proposal to build LNG landing terminals at Hambantota and Colombo together with two or three 500MW combined-cycle generators. Both are very disturbing as government ministries are forcing through contracts in a manner that is technically unsound and ethically inappropriate. The two ministries involved in awarding power and energy contracts are Malik Samarwickrama’s International Trade Ministry and Ravi Karunanayake’s Power Ministry.

I will pass over Kerawalpitiya quickly as plaint has been filed alleging bad practice and multi-million-dollar corruption. As the matter is subjudiceI can say little. Initially the lowest cost bidder, a local company Lakdhanavi was selected, but China GCL appealed and despite the recommendation of the technical committee was awarded the contract. The Movement for the Protection of Consumer Rights then filed a petition and the Courts held that the Power Ministry Secretary had failed to follow proper tender procedures. The case is continuing. Observe that the power shortages I warned about at the time the government peremptorily cancelled the Sampur project have arrived. The net loss from this bad decision, as I then pointed out, will pile up to Rs 200 billion.

The proposal for an offshore Floating Storage and Regasification Unit (FSRU) to supply natural gas to two or three new 500MW (each) power plants is a huge scheme. I have no access to project documents and can only estimate prices from international experiences. Each FSRU terminal will cost about $150 million, and at a guess, at present-value converted prices, the Liquefied Natural Gas (LNG) used over the 20 year project lifespan will cost in the region of $5 billion. (The 3x500MW generators will require about $1.2 billion but is a separate matter). The consequence of bad decisions will be horrendous and will sink Lanka deep into debt. The original offer was an unsolicited bid from Korea’s SK E&S company but was redesigned as a Request for Proposals to open it to international bidding as a “Swiss Challenge”. This procedure compels the government to invite third parties to match or better the original bid. The original bidder, in this case SK E&S, will be given an opportunity to better the best which comes out of the challenge process.

For nearly two years the terms and conditions were negotiated but the CEB says technical details of the generators were not made available. This is an impediment to ensuring integration of new plant into the system and planning transmission expansion. The biggest bombshell then exploded. The Korean proposal that Malik Samarawickrama’s Ministry champions, integrates infrastructure and “take or pay” gas purchase. In simple words this means Lanka will contract for the LNG terminals and simultaneously commit to take the full quota of gas each year over the project lifetime at then prevailing market prices. The down side for a country rich in hydro is that even if we need less gas in some years we will be obliged to pay as though we had taken all the gas. Weighed against $5 billion for fuel, the offer to furnish the two FSRU terminals (say $300 million) free of charge is trivial. The Trade Ministry championing the SK E&S offer is suspicious; you don’t have to lift the lid to know what’s cooking in the pot.

It was in these circumstances that the Board of the CEB decided to opt for “Separate”, not an “Integrated” plan – two separate contracts, one for infrastructure (FSRU, pipelines and installation) and another for fuel purchase on flexible terms. The latter will be open to LNG suppliers other than SK E&S. The Board communicated its decision to the Ministry; the CEB Engineers Union supported the Board. Three CEB personnel put by government on a committee to negotiate an “Integrated” plan with the Koreans had no option but to quit since the committee’s mandate contradicted the Board’s stand. The last I heard was that things are deadlocked. Will Minister Karunanayake be emboldened by Samarawickrama and Wickremesinghe to fire the Board and replace it with quislings?

Tilak Siyambalapitiya, an independent power expert, says “take-or-pay would be a disaster as hydropower availability varies significantly from year to year”. This is correct and furthermore I am concerned that neither of the ministries involved nor the Public Utilities Commission has the necessary depth of understanding or the essential flexibility of approach to resolve the crisis after CEB planners are side-lined. The smell of cash percolates this multi-billion dollar contract!