By Rajiva Wijesinha –

Prof. Rajiva Wijesingha

After the Central Bank Bond Scam, which there were so many desperate efforts to conceal, evidence about further financial fraud by the present government has come in thick and fast. Most worrying perhaps was the contract signed with regard to an unsolicited bid by the Metallurgical Corporation of China to construct the first phase of what is now known as the Central Expressway.

Or rather I should say the agreement, for a contract has been reported to Cabinet for only part of the area allocated to MCC. For the first section, from Kadawatha to Kossinna, there seems to be no contract, and no actual figure has been reported to Cabinet. It seems to be Rs 30 billion (the so-called savings which the Prime Minister claimed to have made on another road). He did not give details of these savings, which in fact happened because the scope of the road was cut down. And he did not tell Cabinet the precise length of the section of the central expressway to be built with these ‘savings’. Kabir Hashim has said it is 4 kilometres, which means that the people are paying Rs 7.5 billion per kilometer if we accept the Prime Minister’s claim about the ‘savings’.

The second part of the road is from Kossinna to Meerigama. That was an unsolicited project, with negotiations conducted over a weekend. The Prime Minister argued for giving this contract on the basis that another contract with the same company, signed by the previous government, had lapsed. He did not mention that the Attorney General, whose advice had been sought, had recommended that that contract be cancelled. Instead he said that, since the company had to be compensated for start up costs (how much these were was not revealed) they should be given a fresh contract for a different section of the expressway. The rate agreed on was Rs4.5 billion a kilometer, over 60% more than same company had quoted for the contract with the previous government that had lapsed.

The details of the agreement are as follows. This government has now entered into agreements with the Metallurgical Corporation of China to construct the first section of what they now call the Central Expressway. This is in two parts, from Kadawatha to Kossinna and from Kosinna to Meerigama. The Prime Minister sought Cabinet approval to sign a contract for the second of these sections, which is 32.5 kilometres. The sum that had been ‘negotiated’ was Rs 145.8 billion, Rs 4.5 billion a km as he claimed in his Cabinet Paper dated 20th July 2015.

The Kadawatha-Kossinna stretch is about 4 km, and the Minister of Highways said ‘that does not involve any cost to the government because the contractor has agreed to bear the cost of this stretch from the savings of the construction of out Colombo circular highway.’ The reference is to the 3rd part of the Outer Circular Highway, from Kadawatha to Kewaralapitiya, constructed by the Metallurgical Corporation of China. It was for that OCH3 that it was claimed during the Presidential campaign that 90% of the money paid had been pilfered on commissions – ‘If a total of Rs. 7.3 billion is spent per kilometre on the construction of the Kadawata – Kerawalapitiya highway, the amount pilfered is Rs. 5.2 billion.’

The contract for that was Rs 66 billion and the Prime Minister said the government cut down the cost by Rs 30 billion or 40%. He said this was by ‘stiffer negotiation’. In fact it was achieved by reducing the scope of the highway – change from viaducts to embankments, omission of an interchange, making it inner 4 lane rather than outer. It has been argued that 6 lanes are not needed on this highway, so it made sense to reduce to 4. However it should be noted that the original plan was for 4 lanes but with provision to expand to 6. It seems a pity that this will not now be possible. It should also be noted that reducing the length of the viaduct by over 2 km, and reducing its height by over 2 metres will increase problems with regard to possible floods.

I am not for a moment saying that limiting the scope of the highway is necessarily a bad decision. But my point is that the reasons for doing this should be made public, instead of a bland claim that stiffer negotiations led to money being saved, thus perpetuating what is now universally seen as the myth about 90% of the original 66 billion contract being pilfered.

Further more, the money ‘saved’ did not come back to the people of Sri Lanka. Instead the Prime Minister simply told Cabinet that ‘The government had already agreed that they (MCC) should utilize the savings in OCH3 to undertake construction of a few kilometres on the first section of expressway from Kadawata where the OCH3 terminates’.

The Cabinet Paper does not mention the precise amount of the savings. There is no indication of when or why the government had agreed to these terms with MCC.

On March 30th the Prime Minster had submitted a note to the Cabinet to say that ‘Unsolicited proposals in general should not be accepted as a matter of policy. In the future, all proposals should follow the Guidelines on Government Tender Procedure issued in 1998’. However, without formal Cabinet permission, the Prime Minister has simply announced that government agreed to the MCC proposal with regard to the Kadawatha-Kossinna section. If this is for 4 km as the Minister said, and if the amount ‘saved’ was Rs 30 billion, that means that the people of Sri Lanka are paying Rs7.5 billion a kilometer, with no contract and no detailed estimates. This is more than the Rs7.3 as to which it was claimed that 90% was pilfered.

There are also questions about the Rs4.5 billion for the other stretch, from Kossinna to Meerigama. This rate was ‘negotiated’ by a Commttee appointed after the Cabinet Sub-Committee on Economic Affairs, chaired by the Prime Minister, approved on July 15th a Committee of four members to ‘oversee rates’. The letter from the Prime Minister giving notice of this did not mention with whom they were to negotiate. The Secretary to the Ministry of Highways and Investment Promotion (a relatively new one since the previous one had been summarily sacked) was asked the next day to appoint that Committee. Its report was ready for the Prime Minister to quote the rates it was recommending in his Cabinet Paper of Monday, July 20th.

That paper claims the Committee ‘has been able to negotiate an acceptable rate’. To prove this it makes a comparison with what the Japanese Contractor was paid for Section 2 of the Outer Circular Highway.

The Prime Minister also compares the rate which was finally paid to MCC for OCH 3. What is not mentioned is the rate quoted by MCC for the Pothuhera to Rambukkana section of the Central Expressway, which was substantially less.

It was because that contract had lapsed that the unsolicited bid for Kadawatha-Meerigama was promoted. In the lapsed contract, the rate quoted was Rs 48.2 billion for 17.5 km. That is Rs 2.75 billion a kilometer, much less than the 4.5 about which the Prime Minister expresses such joy in his Cabinet Paper.

Of course it could be argued that the conditions are different on the two sections and that is why this section is so much more expensive. But we also need to remember that that contract was negotiated when oil cost $110 a barrel, whereas now it costs $49 a barrel. As with the fuel price cut announced in the budget, the savings are clearly not being passed on to the Sri Lankan consumer.

So we now have a situation where the first section of the highway is given for an unspecified figure, with simply references to funds saved on OCH3, suggesting the rate is Rs7.5 per km. And for the remaining 32.5 km the rate is well over 60% more than the same company had quoted to the last government for another stretch of the highway.

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All this is bad enough, coming on top of the Bond Scam. But there is also evidence of others getting in on the act. The Ministry of Power and Energy has proposed buying the 60MW Barge Mounted Power Plant currently in Colombo Port as a cost of Rs 640 million. The Barge is owned by Colombo Power (Pvt) Ltd, and has been in operation for the last 10 years, which would suggest it might not be fully functional now. Of course there was provision to take over the barge in the earlier agreement, but I presume that was also signed when he was the Minister in charge.

And finally the people should be aware of a proposal that may not be dishonest, but will certainly lead to financial deprivation for the ordinary man. Rauff Hakeem has proposed setting up a River Basin Management Authority, on the lines of a similar proposal brought when Ranil Wickremesinghe was last Prime Minister.

Some of the points the proposal addresses require action, but what is worrying is the section under the heading ‘Present cost recovery issues’. There having noted that ‘raw water is free’ the Cabinet Paper goes on to say ‘A revenue generation system needs to be formulated through meaningful and realistic tariff system’.

In short, the consumer, and more especially the farmer, will have to pay for water. Truly, under Ranil’s vision of Good Governance, nothing will be free – except the goodies provided through the donations the increasingly prosperous business community happily provide to the United National Party and its Fronts.