Top committee treading with care on hedging issue

The Ministerial committee headed by Nimal Siripala de Silva asked to resolve the oil hedging payments issue with commercial banks is 'treading' with care on the issue, sources close to the committee said.
Though committee spokesman Prof G.L. Peiris told reporters at the post-Cabinet press briefing that the banks were cooperating and willing to re-negotiate the contracts, the 'real' situation was that the committee was conscious (and made aware) of the fact that the deals were one-sided and heavily in favour of the banks and that Central Bank (CB) guidelines have been violated in the process.

"The ministers are aware of the comments made by the Supreme Court in the case (and that the case was dismissed for reasons other than the deals having problems), the views of the Attorney General (AG) and also that the Central Bank has a strong position on the matter," one source said adding, "the committee is going slow on the issue and will, in time, submit a report to the Cabinet that is most likely to take all these matters into consideration."

The committee which met the bank officials this week is yet to ascertain the views of the AG or the CB on this matter but is most likely to do so in coming weeks, the source said.

The Supreme Court last month vacated interim decisions made in the hedging case and dismissed the petitions after the Government failed to implement Court decisions relating to fuel pricing.

The hedging deals were said to be one-sided and heavily in favour of the five banks – Standard Chartered, Citi, Deutsche, Commercial and People's. The committee which includes Sarath Amunugama and A.H.M. Fowzie has been appointed by the President to look into a possible re-negotiation of the hedging contracts in which the Ceylon Petroleum Corporation (CPC) owes five banks a sum of around $800 million. CPC sources said, after the petitions were dismissed, that they have been advised by the AG to refrain from making the payments.

The CB has ordered the banks not to proceed with the agreements, in effect suspending the receipt of any payments from the CPC.

Some weeks back Chartered Bank CEO Clive Haswell and Citibank CEO Dennis Hussey met President Mahinda Rajapaksa to explain their case with the latter responding that the matter is being looked at by the committee.

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