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AG exposes huge rice import scandal as Govt. prepares to import more
The Auditor General who looked into the import of 257,000 metric tonnes of rice in 2014/2015 says bad practices that included disregard for government tender procedures had resulted in the loss of more than Rs. 15 billion.
Losses continue to accumulate to date due to non-payment of loans taken for the imports and demurrage costs for stocks that remain in privately owned container yards, the AG adds.
The AG, who undertook the inquiry at the request of the Parliamentary Committee on Public Enterprises (COPE), released the report as the Government gets ready to import new stocks of rice to preempt a possible shortage this year.
The stocks of rice were imported by Lanka Sathosa at a cost of around Rs. 27 billion during 2014/2015 but only around Rs. 11.8 billion was recovered from sales thus incurring a loss of more than Rs. 15.1 billion, the AG says.
The imports were made after a Cabinet memorandum was presented by the then Co-operatives and Internal Trade Minister Johnston Fernando in July 2014, citing the need for “maintaining a buffer stock for food security and stabilising the price of rice in the market”.
Lanka Sathosa had obtained loans totalling more than 14 billion from the Bank of Ceylon and the People’ Bank for the Letters of Credit to import the rice but of this amount more than Rs. 8.9 billion remained unpaid till December last year with penalty interest as at November 21 last year amounting to Rs. 7. 9 million.
Even after the change of government, the new Commerce Minister Rishard Bathuideen in February had given instructions for the revision of the two Letters of Credit which were due to expire that month to import Samba rice for the balance value of the Letters of Credit.
The AG says 23,751 metric tonnes of rice still remain in stores and private yards and hence the rent of stores, demurrage on rice containers, transport charges and labour charges will add to the losses.
The AG notes that though initially concessionary 60 days had been allowed without payment of demurrage, Lanka Sathosa had not taken action to get the containers released expeditiously.
Between four and ten months had been taken to clear the major portion of the stocks. Random checks carried out by the Audit officials had revealed large stocks of rice had perished due to water seeping in to the containers. The stocks were infested with worms or insects and giving a putrid smell.
According to the information furnished to the AG by the Senior Accountant at Lanka Sathosa, by November 2016, ground rent amounting to Rs. 15.6 million had been paid to respective Container Yards while another 54 containers remained in yards till the end of last year.
The rice had been imported from India and Bangladesh but the AG says there was no evidence to show if a market study was carried out to select the variety of rice to be imported as large amount of the imported stocks had to be sold as animal feed due to the lack of demand for them in the local market for this rice.
In addition to these imports, Lanka Sathosa had bought about 18,000 metric tonnes of imported rice from the local market to the value of around Rs. 1.1billion between April and December 2014 without following procurement procedures.
No formal contract had been signed with suppliers even though government procurement guidelines stipulate that a formal contract should be signed for any supply of goods or services exceeding Rs. 500,000.
Rice had been bought from the suppliers at different prices as the 14 suppliers had been selected without following a procurement procedure.
The AG notes that there is a need for a major revamp of the rice import process with the strict following of government procurement guidelines and the need for equal and maximum opportunity for eligible interested parties to participate in the process.
The AG also says there should be annual registration of eligible suppliers while purchases in emergency situation should be made by inviting quotations from those suppliers.
The matter is now under probe by the Presidential Commission of Inquiry (Investigation of Serious Frauds, Corruption and Misuse of Public Property, Privileges, Power and Authority) and the Financial Crimes Investigation Division.