Ending a monopoly?

Wednesday, 8 August 2012 00:30 - - {{hitsCtrl.values.hits}}

THE Auditor General is to be called in to investigate oil purchases made by the Ceylon Petroleum Corporation (CPC) from 1 August 2011 to 31 July 2012 in a move to sooth disgruntled nerves over the recent substandard fuel fiasco. While the step is a positive one, it is questionable whether this is enough to set the CPC on the right path.

The Auditor General regularly investigates the reasons for numerous public institutions wasting public money, but rarely are officials punished for it, or the balance sheets turned around. Therefore, given the string of questionable actions by the CPC, it can only be asked that the Auditor General be supported with decisive and stern action from the highest powers in the Government. The situation certainly calls for tough action.

Just days after losing an appeal in a London court ruling, which ordered it to pay nearly $ 162 million plus interest for non-payment of dues to Standard Chartered Bank linked to hedging deals, the CPC was out and about blundering as usual. In this instance the Minister has responded with appointing a committee to investigate the claims and readers will recall this is a standard “go to” procedure, through which no officials are ever punished for wrongdoing.

In the previous instance, thousands of vehicles were damaged when the CPC distributed substandard oil. Despite Government steps to provide compensation, many claims were underpaid or not made at all given the inefficient system that was put in place. In this instance public transport has been hampered, not only causing inconvenience but also wasting public funds – a fact that does not seem to bother the CPC or the State at all.

To add insult to injury, the CPC is also fighting another battle on a different front with UAE-based Fujairah Petroleum Company. The blatant lack of transparency of this deal has raised new questions over the governance of CPC and why repeated transgressions have been allowed with little or no redress.

It was reported that the Government agency stands to lose at least Rs. 1 billion from the deal, which industry sources allege is irregular and violated tender norms. Last week officials from highly-suspect Mocoh, a Swiss-based oil distribution, logistics and trading company acting on behalf of the UAE supplier, arrived for talks with CPC.

The problem hinges on the obscurity of the new firm and few people understanding under what precedent the CPC is “rectifying” the deal. Given that the CPC has a long track record for corruption as well as staggering losses that are undermining the passing on of global price reductions to the consumer, the matter needs in-depth attention from stakeholders.

Despite being a vital public institution, the CPC is identified with the proverbial “den of thieves” and it is unlikely that the situation will become better as the Government continues to turn a blind eye and refuses to address repeated debacles of massive corruption.

There have been thoughts expressed on ending the State monopoly and allowing the private sector to create a competitive market, thus motivating CPC to get its act together. Many point out that Lanka IOC has managed to find a lucrative market in Sri Lanka despite Government price regulations and the structure should be broadened to allow other companies to import and distribute fuel – perhaps an option to minimise CPC corruption.