News
State Institutions wallow inmassive losses fraught with fraud
The interim report of the Committee On Public Enterprises (COPE) presented to Parliament on Tuesday, exposed huge financial losses incurred by State institutions.
Some of the biggest losses were incurred by the debt-ridden Ceylon Petroleum Corporation (CPC) with an estimated loss of Rs 8.3 billion on the procurement of petroleum products during the period 01.06.2011 to 30.06.2012, due to inefficiencies such as delays in laboratory tests, lack of coherent communication, preparedness to meet the challenges of a volatile market, overpayments, delays in planning orders for procurement of petroleum products, uneconomical blending of high and low octane petrol, etc.The CPC had also overpaid US$ 2,060,842 to a UAE Company due to the inclusion of the premium of US$ 54 twice in the agreement entered into with the said Company to procure fuel.
It also revealed that the total loss incurred by the CPC due to the Hedging Transaction had been US$ 75.28 million.The Report also exposed that, even though Sri Lanka Telecom (SLT) had purchased 75% of shares of Sky Network Ltd. for Rs 108 million, to obtain the frequency required for the continuation of service related to WiMax technology, the Company had closed down after a couple of years, with no adequate business activities done on the grounds that the technology had become obsolete. It said that the transaction looks suspicious, as the said company, formed in 2006, had not conducted business activities other than retaining a frequency, until it was purchased by SLT in 2008.
It was also revealed that Rs 10,468,000 had been paid as Director fees during the period the Company did not function, and the person paid happened to be a Director at Sky Network Ltd.
The following are some of the other highlights of the COPE Report:-
The State Plantations Corporation (SPC) land situated at Gregorys Road, Colombo 7, which was once mortgaged to the Bank of Ceylon for Rs 50 million, had later been sold by SPC to a private company for Rs 243 million, subject to certain conditions related to the redemption of the mortgage. However, the SPC had received only Rs 11.9 million in respect of this transaction.
The Central Environmental Authority (CEA) had overpaid a sum of over Rs 19.4 million to a contractor for its Solid Waste Management Project in Dompe, as the tender had been offered to the 6th highest bidder, ignoring the justifications of the lower bidders. The Authority had suffered a further loss of over Rs 30.1 million as a result of paying Rs 295 per cubic metre, without charging the regular Rs 45 from the contractor for the removal of 88,648 cubic metres of earth.
n The Electronic Timing Machine purchased for Rs 44 million by the Sugathadasa National Sports Complex Authority to be used at the 2005 SAARC Games, was not operating since 2010. Further, it can be used only for two more years, even after repairing, as the particular software becomes obsolete after two years.
The Volleyball court constructed at Jayathilake Stadium, Nawalapitiya, by the National Youth Services Council, at a cost of Rs 1,287,440 in 2011, had been closed after seven months, on a decision taken to upgrade the playground.
The Ceylon Fishery Harbours Corporation had made an advance payment of Rs 2,791,215 in 2011, to a contractor, without entering into an agreement, for the construction of six fuel tanks. However, no construction had been carried out and the institution has, to date, been able to recover only Rs 1 million of the advance payment.
As the Rubber Research Board had not carried out a proper valuation and obtained an insurance cover for the actual value of their properties, it received only Rs 930,000 as compensation against its assets worth nearly Rs 7.5 million, destroyed by fire in a factory, as a result of deploying a non-skilled labourer to operate a furnace.
Deviating from the normal interest rate of 18%, the Housing Development Finance Corporation Bank (HDFC Bank) had paid a higher interest of 22.5% for the Fixed Deposit of Rs 450 million of the Ceylon Electricity Board, as the Bank had been in need of long term funds. Nevertheless, the Bank incurred a loss of Rs 69 million from this transaction.
The Co-operative Wholesale Establishment has written off the loss of Rs 5,095,455 caused by 11 conveyer motors going missing. The Employees’ Trust Fund Board has paid incentives amounting to Rs 74.8 million, bonuses amounting to Rs 44.5 million and loans amounting to Rs 338.9 million, at the rate of 4.2%, contrary to Treasury circulars. However, the Management stated that it was not in a position to regularise the matter, as its employees have been enjoying these privileges for a long period of time.
The operating expenditure of certain institutions had been significantly high due to the excess number of employees. For instance, SLT has a cadre of nearly 8,000, whereas the actual requirement, as stated by its Chairman, is around 6,000. This has led to a decrease in the profitability of the institution.
Out of a total of 10 routes serviced by Mihin, only two were found to be profitable, while flying to a destination such as Seychelles, at a loss of US$ 214,000, raised concerns among certain Committee members.