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Lakvijaya 4: CEB plundered and squandered Rs 167.6mn
View(s):The Ceylon Electricity Board (CEB) is seeking to waive off Rs 167.6mn incurred in just three years as expenditures for the defunct Lakvijaya coal power plant 300MW extension project. A fourth unit was never built in Norochcholai and the project management office was disbanded last year.
The request to “write off the expenditures incurred and recorded in the books of accounts” is contained in a board paper that has not yet been approved. It is reportedly awaiting the General Manager’s comments.
Separately, the CEB’s Chief Internal Auditor has investigated the matter and produced a report, a copy of which was seen by the Sunday Times. The costs were run up between June 2019 and April 2022.
The board paper said the project management unit (PMU) was disbanded owing to a Government policy that there would be no more coal power plants. However, other official documents and reports show that the extension would have required a new transmission line which was not part of the project. The existing coal unloading infrastructure was not enough and would have required further spending.
The expenditures included PMU staff salaries and other office overheads. By the time the project was shelved, a comprehensive joint feasibility study and the environmental impact assessment were both done, the Chief Internal Auditor’s report stated.
Negotiations on the joint venture agreement were completed and the project agreements were drafted. A financial model was also developed with the assistance of a financial consultant to be used for price negotiations with China Machinery Engineering Corporation (CMEC) and loan agencies. CMEC is the builder of Lakvijaya’s other three units.
Documents also show that Rs 43mn was paid to renovate the road from Norochcholai to Illanthiyadiya and Paniadiya, which were close to Lakvijyaya. It was approved as a corporate social responsibility project “with a view to minimise any possible resistance by the people for the extension project of Lakvijaya Power plant,” a board paper stated.
The Chief Internal Auditor’s report said personnel expenditure alone was more than Rs. 63mn (37.62 percent of total) while unspecified “other expenditure”–at more than Rs. 86.7mn or 51.74% of the total–was deemed as “substantial”. The three permanent staff members–a project director and two project managers–earned Rs. 36mn in salaries and allowances. The consultancy fees amounted to Rs 21.5mn. Other costs include legal fees and building rents.
The Auditor’s report recommended that PMUs are hereafter established only at the implementation stage of any project “so that it will avoid unnecessary losses of this nature to CEB.”
“It appears that the scope of setting up the PMU is only to carry out the background works of the project without implementation…,” the report stated. This is risky because, if the project does not go through, “a huge cost must be written off out of the board or public funds.”
“Further, in relation to this PMU, the allowances paid to employees amounts to Rs. 18,617,863.39,” it noted. “A substantial portion of this cost would have been saved if the PMU had been [sic] set up at the time of implementation of the project.”
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