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Rs. 2.1 billion asked for mystery school uniform order
Cabinet is considering a joint ministerial request to approve a Rs. 2.1 billion payment for school uniform material ordered years ago from India by the now defunct Lanka Salu Sala. Once approved, the cloth will be distributed to schoolchildren in special circumstances.
The request was contained in a joint cabinet memorandum submitted for approval last month by the Ministry of Industry and Commerce and the Ministry of Education.
Cabinet Memorandum No. 2018/55 dated September 19, 2018 seeks approval to purchase some 8.4 million metres of uniform material ordered back in 2015. The cloth was meant to be sold to school students under the voucher system. The 8.4 million metres is part of an order placed on December 15, 2015 by the Ministry of Industry and Commerce for the supply of 12.1 million metres of uniform material (including shirting, robes and trouser cloth) from Varcheswi Marketing Agencies (VMA) of India through Varcheswi Overseas (Pvt) Ltd in Colombo (VOPL).
Due to delays, the first consignment of 468,609 metres of cloth arrived only on February 24, 2016, four days before the expiry of vouchers already distributed to school students for the purchase of the material. The consignment was cleared by Lanka Salu Sala and is still lying in a private warehouse, Global Transportation Logistics (Pvt) Ltd, in VOPL’s custody.
The second consignment of 862,577 meters reached Colombo Port on November 24, 2016 and is lying uncleared in a port warehouse. The rest of the material, it is understood, is lying in a warehouse in India. The supplier says this stock – 7.1 million metres – cannot be sold off in India as it had been manufactured to Sri Lanka’s specifications.
An investigation carried out by the Ministry of Industry and Commerce reveals that the order had been placed without approval by the ministry, the board of directors of Lanka Salu Sala or the Ministry of Education. There were doubts about the bidding process. The chief internal auditor of the Ministry of Industry and Commerce stated in a report that violations of contract obligations of procedures had been committed by all sides.
A committee of five officers headed by the Additional Secretary (Internal Trade) was appointed to study the auditor’s report. It recommended that the case be submitted to a “suitable institute for further investigation as there is a doubt about financial fraud”. Despite the suspicions about fraud the committee recommended that action be taken “to settle the due amount to the supplier through suitable procedure in a diplomatic manner without making any harm to the relationship between India and Sri Lanka”.
On May 3, 2017 a letter along with relevant documents was sent to the Attorney-General, seeking his opinion on the issue. A reminder was sent on November 8, 2017, for which a reply is awaited. The Ministry of External Affairs of India, through the High Commission of India in Colombo, approached the Ministry of Foreign Affairs to settle the matter amicably.
Following discussions with the supplier, it has been agreed that as procurement guidelines had not been followed, payment will be offered for 8.4 million metres (the produced and supplied quantity only) of the initially agreed amount of 12.1 million metres. According to the per-metre price agreed on with the supplier in 2015, the payment would be $US11.8 million – equivalent to about Rs. 2.1 billion. The exact sum will depend on the foreign exchange rate at the point of opening the Letters of Credit and making payment.
As neither the Education Ministry nor the Ministry of Industry and Commerce have the human resources, facility or machinery to cut and pack the material, Treasury is being asked to bear an additional cost of $US2 million for this job at the rate of $US0.23 a metre. The material will be distributed to government school students facing deprivation due to natural calamities. The provision will not affect the existing voucher system.