If fuel prices rise, it will save CPC Chairman Asantha De Mel and his organisation: if it continues to fall as seen in recent weeks, the CPC debt will continue to zoom.
In this equation, the consumer doesn’t benefit: either prices going up or coming down. Now, what kind of rational explanation is this .. one may ask. Simply put … this is how the controversial oil hedging deal has been structured that has created a storm across the island.
Calls for De Mel’s resignation are growing as the government grapples with a near $400 million payout if oil prices remain at current levels while equal pressure is on to stop payment to the banks who have been accused of misleading the CPC. While the enormity of the problem is just seeping in – all due to the efforts of this newspaper to raise awareness over an economic calamity – the CPC chairman was stumped by a deep understanding of oil hedging at a recent probe meeting where he was summoned in the presence of several ministers and opposition legislators. Education Minister Susil Premjayanth in particular, armed with stacks of documents which included a detailed version of The Sunday Times exposure of this one-sided deal, literally pounced on the chairman with facts and figures to which the latter had little answers.
Apart from the oil hedging scam which essentially is because the CPC was sold an instrument that was heavily weighed in favour of the banks, the whole fiasco has opened a can of worms with the newspaper being privy to ‘unheard of’ happenings at the CPC that would further stun this nation.
Much of that would also be dealt with in the raft of fundamental rights petitions already filed or being contemplated. After hearing one case, the Supreme Court on Friday called for the suspension of both Minister A.H.M. Fowzie and De Mel. The Sunday Times FT desk has been besieged with calls ‘for action’ from consumers and citizen rights’ groups seeking more information on this saga. “Could you provide a simple explanation of hedging” or “do you have details of the contracts” were some of the questions asked as more groups prepared to appeal to the Supreme Court to exercise their right. What is clear then and now is that few people (apart from a few experts) had no clue about hedging, which if properly explained (as we have learnt now) is not difficult to understand. Hedging is like an insurance policy – taking a policy so that if things go bad for the business or an individual, one is protected. Hedging is not a bad idea and used extensively across the world mainly in commodity trading but the problem here was that the CPC lacked expertise apart from De Mel and CPC DGM Lalith Karunaratne, as they claimed!
The problem in the present case is that the CPC resorted to the wrong hedging instrument and there lies the story. Across The Sunday Times today there are more details of this episode – in which among the main issues are the lack of transparency and accountability – in addition to a series of events that unfolded this week.
De Mel continues to say that he was misquoted in an interview with The Sunday Times over the lack of understanding of hedging by the Ministers. For the record, this is what he says (from the newspaper’s verbatim recording of the interview): “In hedging, he (Mr Karunaratne) and I have the most experience in hedging today. Name one person who has had this exposure? Our politicians, our government has not understood hedging. How do I explain to them? We have gone and explained to the president, the governor, the treasury, the minister, the consultative committee?”
De Mel says he got cabinet approval – waving a paper at the ‘infamous’ press conference flanked by CEO’s of Standard Chartered Bank, Citibank and Commercial Bank – and expressed the same point at The Sunday Times interview by providing a cabinet memorandum as proof. Ministers at this week’s probe committee confirmed that no approval was given. Neither did the board of directors give approval, its members told the committee.
While the issue triggered a series of developments, it has brought together both the government and opposition in seeking the truth – for the public good. The banks – who claim to have informed the CPC of the risks -- shouldn’t also be allowed to go scott free for a deal that has dearly cost the country. |
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