Columns

• Leading US firm to coordinate Central Programme Management Unit to restructure and transform development process
• Accelerated and integrated economic programme all over the country; Cabinet approval sought for five-tier agreement
• Crash-landing SriLankan gets emergency financial support to pave way for signing of public-private partnership 

By Our Political Editor
The troubled national carrier, SriLankan Airlines, where a head-on battle is under way between the management and the pilots, has received further life support again.

This is after Treasury funding for the financially crashing airline was to be stopped from October this year, as revealed in these columns on March 27. Notwithstanding this, an undisclosed amount was provided to the airline just a month ago.

This time, the Cabinet of Ministers has approved the provision of a letter to SriLankan Airlines declaring that the Government of Sri Lanka “will consider taking over a part of the debt of the company until such time the restructuring is completed.” The Cabinet has agreed that the Ministry of Finance will extend the required financial support to SriLankan Airlines. A similar decision has also been made in respect of Mihin Lanka. It was sought by the Ministry of Public Enterprise Development under which the two carriers come.

As part of the reconciliation and all-inclusive development programme, Prime Minister Ranil Wickremesinghe was in Jaffna yesterday for several events. He is seen at the opening of the Jaffna District Secretariat office. Also in the picture is Northern Province Chief Minister C.V. Wigneswaran

The ministry said in a Cabinet memorandum that “the restructuring plan envisaged in 2015 has now changed, and the Government has embarked on a Private Public Partnership (PPP) which will ensure the “Going Concern” of the Company” and that the Auditors have requested “for a letter from the shareholder (the General Treasury) confirming the same.” It adds “accordingly, they are expecting the airline to continue its operations until the PPP is finalised. It should be noted that maintaining the “Going Concern” status of the airline will be a pre-requisite for concluding a successful Public Private Partnership,” the Ministry has said.

However, the Ministry of Finance has made clear that the Treasury has provided substantial investment and financial support to the two state owned airlines “without any return of investment.” Hence, it has insisted that the process of entering into “the Public Private Partnership (PPP) should be concluded before the end of October 2016 in order to mitigate any further deterioration of the negative net worth of both the entities.”

The Ministry of Finance has also taken up the position that “all assets and liabilities including contingencies need to be transferred to the proposed PPP entity without creating additional financial burden on the Treasury.” This position is a clear indication that the Treasury may not absorb any of SriLankan Airlines losses.

For the SriLankan Airlines, the life support from the Treasury could not have come at a better moment. Copies of the accounts for the financial year ended March 31 this year, circulated among the Cabinet of Ministers, paint a gloomy financial picture. The accounts raise more questions than answers. They cast a serious doubt whether any prospective partner would show interest looking at the colossal losses.

Non-current (or fixed) assets with SriLankan Airlines amount to Rs. 23.5 billion. The current assets are placed at Rs. 26.8 billion whilst the current liabilities are Rs. 99.9 billion. Economists and Chartered Accountants say that in a healthy company balance sheet there should be a ratio of 2:1 or two billion rupees of current assets to one billion rupees of liabilities. In the case of SriLankan the ratio is negative and extremely alarming now. The national carrier is becoming increasingly insolvent if not insolvent already.

As for the operational aspects during the Rajapaksa administration (year ended March 31, 2015), the turnover was Rs. 132 billion whilst the latest accounts (ending March 31, 2016) reveals that it was Rs. 129 billion. Thus, there has been a revenue reduction of Rs. 2.5 billion. The net operational loss that stood at Rs. 14 billion had been creditably pruned down to Rs. 7 billion under the present administration. That indeed is a plus point for the national carrier though it is still in the red. The loss before taxation was Rs. 16 billion (under the previous regime) but the latest accounts reveal that it has come down to Rs. 12 billion. This loss is after payment of Rs. 2.5 billion as compensation for not accepting orders placed with Air Bus Industrie in Toulouse, France for A 330s and A 350s. Public Enterprise Development Minister Kabir Hashim revealed in March this year that the price for the new aircraft was 30 % higher than the normal price. He said then that with moneys lost, the Government could have built 300 schools or 65 fully equipped hospitals. Finance Minister Ravi Karunanayake, a Government source said, has made clear there will be no Treasury funding for SriLankan after October this year.

The Rs. 140.6 billion accumulated loss alone would require 14 years to wipe off on the basis of making Rs. 10 billion profit every year as from now. How the orders came to be placed under the previous administration and who is the Air Bus Industrie agent in Colombo still remain a mystery. Nor has a fully-fledged inquiry been carried out to identify the crooks who skimmed off commissions.

The financial situation of SriLankan Airlines is fast deteriorating as the management is locked in a head-on battle with the Airline Pilots Guild of Sri Lanka (ALPGSL), this time over breathalyser tests. An earlier controversy centred on pilots using the Business Class lounge in Colombo and other airports. It has been withdrawn by the management. Sujith Jayasekera, a senior pilot has now been suspended without pay after he allegedly refused to subject himself to a breathalyser test. The management has argued that his refusal amounted to his being under the influence of alcohol, a charge pilot Jayasekera strongly denies. Yet, he was allowed to fly an Airbus A 330 with a complement of passengers after his refusal. Pilot Jayasekera has now challenged the composition of the team that conducted the test alleging that it included three retired police officers. Since then nurses have been included in the team to conduct breathalyser tests. Public statements issued by the SriLankan Airlines management have compounded the situation. Admission of controversial issues within the airline or placing an official stamp, some complain, would put off would-be partners and lower passenger confidence both in Sri Lanka and abroad. Pilots complain that one of the causes for the deterioration of relations is the lack of proper airline management expertise among those running the airline.

The ALPGSL called upon its membership to engage in a “work to rule campaign” as a protest against this suspension. The management’s tough stance against this was conveyed to the pilots. Captain Rajind Ranatunga, head of flight operations said in a message to them that “In light of the decision made by the ALPGSL instructing its members to adhere to the ‘published roster’, it is with much regret that we the Flight Ops management are compelled to take the following decisions in order to minimise the disruption to the flight schedule.

“1) A two week roster will be published and annual leave will be cancelled during these two weeks. Crew whose annual leave is cancelled will be placed on STBY duty, but if the situation normalises the annual leave will be reallocated. However annual leave will be cleared due to contract expiry and there will be no impact on crew members who have commenced annual leave in the present roster.

“2) Flights requests/off day requests/mutual changes may not be accommodated.
“3) Mihin Lanka flight crew will be seconded to SriLankan.
“4) Non-essential training such as command training and CCQ (Cross Crew Qualification) training will be postponed. We sincerely hope the situation will normalise as soon as possible.”

The ALPGSL, however, has stuck to its decision. The imbroglio continues.
The national carrier is among those which will be affected by last Tuesday’s decision by the Cabinet of Ministers to place a 15 % VAT on airline tickets for those flying out of Sri Lanka. Details of the new Value Added Tax (VAT) draft law were exclusively revealed in these columns last week. They were approved by the ministers. Ministers also approved a 21 page draft law which makes provision for the VAT payments “for any taxable period commencing on or after January 1, 2015 and ending on or before March 31, 2016 and for the period commencing on April 1, 2016 and ending on May 1, 2016 and for the period commencing on July 12, 2016 and ending prior to the date on which this Act comes into force.”

The Government expects the VAT increase to take effect from October 1 unless procedural formalities delay it further. One area of delay, it is feared, is the likelihood of groups opposed to the new taxes going to the Supreme Court. Yet, careful consideration has been given to the preparation of the new draft Bill taking into consideration the recent rulings of the Supreme Court.

New development strategy
Another significant matter awaiting the approval of the Cabinet of Ministers is a far reaching proposal by Prime Minister Ranil Wickremesinghe to hire the services of a firm from the United States for “setting up a Central Programme Management Unit.” He wants to introduce a draft law in Parliament titled Development (Special Provisions) Bill.

Wickremesinghe has told his ministerial colleagues that “Given the time constraints, and the complexities involved, adopting a traditional approach in setting-up such a unit, may not result in meeting the desired outcomes.” He has recommended that McKinsey and Company of the United States be hired to undertake the task for three months. He has recommended “contractual payments of US$ 2.3 million” during 2016 with a supplementary budgetary allocation through the consolidated fund.

The objective of the Central Programming Management Unit, Premier Wickremesinghe has explained, “is integrated and accelerated economic development across the country and restructuring and transformation of the economy to a vibrant and sustainable social market economy. Having reviewed the capabilities, and proven experience in setting-up of similar Central Programme Management Units (CPMU) in rapidly transforming economies, such as Malaysia, it was considered to request McKinsey and Company to submit a proposal to set up a “suitable unit in Sri Lanka.” He has revealed that the company has submitted a proposal pursuant to several visits, consultations and evaluations.

Wickremesinghe has said that a five-tier agreement has been proposed with the US firm. They are:
= The core leadership team will comprise a team of four leaders from various McKinsey offices, with experience in country transformation, McKinsey Delivery Methodology and knowledge on Sri Lankan context and on topics of national priority.
= The Global Expert Panel will be a selection of McKinsey experts from around the globe on each priority project.

= The Senior Experts drawn from an advisory team of experienced practitioners from around the globe e.g. Nika Gilauri, former Prime Minister – Minister of Finance and Ministry of Energy for Georgia and Peter Ho, former Head of Civil Service, Singapore.
= The working team will be a full team consisting of a project manager and four consultants, who will be co-located with Sri Lankan working team for the duration of the project and serve as the primary liaison on day-to-day project matters.

= The support team will be a full time remote team comprising research analysts, economic modelling specialists, visual graphics designers, communication specialists and administrative support staff who will support the working team on a continuous basis.
Among the deliverables assigned to the US company is what is called “clear prioritisation criteria and a prioritised subject of economic initiatives expected to yield highest impact.” Another is “clear documentation and alignment on meetings, reporting cadences and decision rights (i.e. what gets decided by PM vs by Minister etc.)

The proposed Central Programming Management Unit will function under the Prime Minister’s office. The focal points of co-ordination will be the Ministry of National Policies and Economic Affairs (under the Premier) and the Ministry of Development Strategies and International Trade and the proposed Agency for Development.

JHU convention
On the political front, the Jathika Hela Urumaya (JHU) will have its annual convention on September 24. One of its leaders, Minister Patali Champika Ranawaka said yesterday that the party hopes to form a ‘broad front’ with parties that helped in the January 8 ‘revolution’ that elected President Sirisena to office. “We will throw open our membership to different groups and will reduce the inclusion of members of the Buddhist clergy at different leadership levels,” he added. The JHU sessions follow that of the Sri Lanka Freedom Party (SLFP) and the United National Party (UNP).

President Sirisena will leave today for New York to attend the 71st sessions of the UN General Assembly. The occasion also marks the first anniversary of the Sustainable Development Goals. More than 140 world leaders, the UN said yesterday, will attend the current sessions.

Officers and men my top priority- New Air Chief The separatist war was raging. It was a sultry afternoon on February 5, 1986. A Bell 212 helicopter was flying low along the Kalawanchikudi-Maha Oya Road in the Batticloa District. It was providing air cover to a Police convoy led by ASP N.K. Illangakoon, who was to later become the Inspector General of Police.Those were the days when Sri Lanka Air Force (SLAF) pilots did not wear helmets or the “bone dome” (their protective headgear). Suddenly the front window cracked and a bullet hit the pilot’s head. Blood poured down his face but he was still able to gain altitude, turn the chopper and make an emergency landing at the SLAF base in Batticaloa. Air Marshal Kapila Jayampathy A De Havilland Heron Riley aircraft captained by Squadron Leader Donald Perera (later to become Air Force Commander) landed at the base to fly the pilot casualty to Colombo. When it arrived at the Ratmalana airport, a helicopter with its rotors running was on the ground. Wing Commander Oliver Ranasinghe (who was also to become a Commander of the Air Force) flew the casualty and touched down on a makeshift helipad at the Sri Jayawardenapura Hospital. He was admitted to Ward 15, meant for troops, and became the first officer to enter there as a casualty. Doctors who were waiting hurriedly examined him. Unbelievable but true, the pilot had escaped death miraculously. A bullet had grazed his head but did not enter his skull. Otherwise it would have been certain death. The fire came from a member of the Karuna group which carried out Tiger guerrilla operations in the east. It was led by Vinayagamoorthy Muralitharan, the LTTE eastern leader, who was to later become a Deputy Minister in the Rajapaksa Government. That lucky pilot lived long enough to become the 16th Commander of the Sri Lanka Air Force last Monday. Air Marshal Kapila Jayampathy who has won the nation’s highest gallantry awards is a veteran helicopter pilot and a qualified Flying Instructor. For the first time, officers and men in the 25 SLAF installations in Sri Lanka got a live coverage of AM Jayampathy taking over as Commander. This was through video streaming to large screens, for which the SLAF has the technical capability. AM Jayampathy succeeded Air Marshal Gagan Bulathsinhala who has served a year and a month, the shortest stint any SLAF Commander has been in office. In fact, Defence Secretary Karunasena Hettiaratchchi had recommended an extended term after he reached 55 years on Sunday September 12, 2016. There were expectations that President Maithripala Sirisena who was chief guest at the “Ranaviru Real Star – 2016” on Sunday night would give some indication. This was because the Defence Secretary and the Armed Forces commanders were all present. However, other than blending socially with his usual camaraderie he gave no indication. It was later that night that he telephoned Defence Secretary to say that he had made up his mind. The President asked him to prepare papers for the appointment of Air Vice Marshal Jayampathy who was later promoted as Air Marshal. AM Bulathsinhla was promoted to the rank of Air Chief Marshal after his retirement. His sudden retirement denied him the opportunity of making the customary farewell calls on SLAF installations countrywide. “My highest priority,” Air Marshal Jayampathy told the Sunday Times “is the welfare of my officers and men.” He said he would ensure that their living standards are improved so that their morale remains high. “It is only then that they can serve our organisation, the public and the country better,” he pointed out. He said that he would also endeavour to recruit more members of the minority communities to the SLAF. Their interaction with their new colleagues and the people would thus help in reconciliation efforts. In a post-war scenario, that would be a key factor, he said. The new Air Chief declared that dreaming of grandiose plans and trying to make them a reality was not a right approach and was impractical. “We do need to modernise. We must dream of things which can be turned into reality. We have to bear in mind the economic situation in the country and not pose higher financial burdens on the Government. We will tailor our modernisation needs accordingly and improve them incrementally.” Air Marshal Jayampathy who counts 33 years of service in the SLAF said there was no gainsaying the SLAF air capability should be developed through new platforms. We have to co-ordinate our efforts with the Sri Lanka Navy and the Coast Guard in a larger effort to protect our security interests. That is to curb smuggling of drugs, gold and other contraband since they affect our economy. We are an island nation and we have a vast economic zone to protect. We also have to secure Sri Lanka’s Flight Information Region (FIR). Ninety per cent of the FIR is in the ocean. We have to develop a programme for eventualities in this area. The Malayasian flight MH 370 that disappeared has raised various issues. It showed that only some countries were equipped to carry out searches. We must be geared to identify an area in the unlikely event of an incident. “Although our role is largely related to air capability and allied matters, I would say that our organisation is a multi-purpose university,” AM Jayampathy said. The SLAF was training skilled personnel. They could help Glider flying in Nuwara Eliya to help tourism. They could gear themselves to overhaul commercial aircraft. We have the technical expertise for it. “We will begin by giving our officers and men a good deal so they would be much happier to serve. I assure this,” he added.