Cleaning up CPC

Wednesday, 6 July 2011 00:00 - - {{hitsCtrl.values.hits}}

THE Ceylon Petroleum Corporation (CPC) continues to stumble from one bungle to the next. As if haemorrhaging billions of rupees was not enough, the mismanagement of the State-Owned Enterprise (SOE) has reached a dangerous state with 20,000 tonnes of sub-standard fuel being imported circumventing tender procedure. Evidently disgruntled by the repeated blunders, the Ministry Secretary handed over his resignation and took pre-retirement leave on Tuesday in what seems to be action similar to that of the former IGP Mahinda Balasuriya.

The CPC has repeatedly hit headlines over the past few days. First for the leakage from its pipelines that has lost millions and then for importing substandard fuel. The Minister attempted to sweep the matter under the carpet by insisting that the contamination was due to new fuel mixing with residue from older oil supplies, but had to backtrack after many incidents started filtering in from around the country. It was reported that dozens of vehicles had been damaged by the substandard fuel and that even pumps were affected. This could mean billions to repair the pipes and clean up the tanks as well as more insurance claims as vehicle owners attempt to get their rides running again.

In a classic case of the left hand not knowing what the right hand is doing, information filtered out of how the import was made without tender procedure. Under pressure to take action, the Minister suspended the payments and appointed a tripartite committee to probe the rapidly unravelling circumstances. However, this is too little too late and the CPC has to finally answer for is ridiculous levels of mismanagement and bad governance. It would also be imperative for the report to be made public and officials – starting right from the Minister – be held accountable for this sad state of affairs.

Obviously the bulk of CPC’s financial haemorrhages are due to mismanagement. Even though the Minister consistently trots out the excuse that the CPC is selling fuel at a loss, Rs. 2 per litre of diesel and Rs. 33 per litre of petrol according to the latest estimate, there are times when the retail price of countries such as the US is lower, showing that mismanagement rather than subsidies is what is draining the white elephant institution.

The CPC’s losses grew from Rs. 12.3 billion to Rs.14.7 billion from 2009 to 2010 and the trend is set to continue this year unless the situation changes drastically. It would be unrealistic for anyone to expect that the CPC can wave a magic wand and suddenly become efficient, but this latest incident highlights yet again the importance of at least putting in place a plan that will eventually make the CPC solvent.

Being transparent starts at the top. It is obvious that the Minister has scant idea of what is happening within the CPC and the Secretary resigning points to broiling management issues. Unless the Government takes steps immediately to bring these offenders to book, billions of public money will continue to be squandered.

It has been estimated that as much as 2% of GDP is being leaked out by loss-making SOEs. For Sri Lanka to reach a level of development, these numbers have to be reduced not just in the CPC and CEB, but dozens of enterprises under the Government.