State agency discrepancy inflicts massive loss on Shipping Corp
Ceylon Shipping Corporation Ltd (CSC), the national carrier, is now facing financial difficulties as it is deprived of over 90 per cent of the cargo import and transportation share of state institutions, a performance audit report revealed.
Although state institutions are compelled to obtain these services from the CSC, the transportation of containers with goods imported for these institutions has been entrusted with external transporters.
Less than 10 per cent of import, export and transportation of goods are handled by the CSC and the rest by the private shipping companies causing a massive financial loss to the CSC, the report divulged.
Imports of shipments of all state agencies including for the foreign projects should have to be done through the CSC as per the regulations in the Public Finance Circular No.415 dated May 6, 2015 and in terms of the decision of the cabinet on January 13, 2016.
The Central Bank has also issued instructions on August 11, 2016 to commercial banks stating that opening Letters of Credit (LC) for the import of goods by the government institutions should be done through CSC as the state freight carrier.
But state institutions were in the practice of importing goods through other private shipping companies depriving the CSC of 700 freight opportunites in 2017 and 538 in 2018, the report revealed.
The CSC has failed to adopt a suitable methodology to obtain business from state agencies in connection with importing of goods and to enlarge company’s market share, it said.
Further the CSC is also incurring a loss owing to heavy loan interest payable to a state commercial bank for the purchase of two vessels from China and the decline in revenue from coal transportation, the 2017 performance report revealed.
It has been facing financial hardships in the challenging market conditions amidst stiff competition since the loan repayments to the People’s Bank commenced in August 2016.
According to the report, the CSC has incurred loss of Rs. 621 million due to the payment of two vessels loan interest of Rs.744 million and decreasing the profit from transportation of coal.
The loans had been guaranteed by the Treasury, which means taxpayers have to bear the burden if no action is taken to rectify the situation, a senior official said.
Local shipping agents have urged the government to convert CSC to a strong regional non-vessel operating common carrier (NVOCC) operator and remove excess regulations to revive the national carrier to become a sustainable operator.