Hedging horrors

Wednesday, 7 November 2012 00:02 - - {{hitsCtrl.values.hits}}

THE hedging fiasco that has been hanging over Sri Lanka for the past four years is a classic case of official negligence coupled with State-sponsored impunity that is depriving the people for billions of rupees.

For the moment the Government has lost two arbitration cases, one with Standard Chartered Bank that could cost US$ 180 billion (US$ 160 million as payment and US$ 20 million as interest) and US$ 60 million plus interest to Deutsche Bank. Yet, as pointed out by public interest litigant Nihal Sri Ameresekere, the Government together with the Attorney General’s Department continues to flounder in a legal morass that could lose the country a substantial loss of money.

In a letter to the Attorney General, Ameresekere noted that the AG had blocked Applications to invoke the jurisdiction of the Supreme Court of Sri Lanka, to have prevented the foregoing foreign legal proceedings, through anti-suit injunctions. He questioned why stronger action was not taken by the AG to protect Sri Lanka’s interests.

He insisted that it is baffling as to how the stance of illegality of the said transactions was taken by AG, whilst at the same time those involved in the perpetration of such illegality had not been taken to task and arraigned before the law. “Some of them had even been taken overseas to give evidence, whilst they admittedly had been previously compromised, through foreign jaunts sponsored by the said banks!”

Costs of defending foreign legal proceedings are not disclosed to the public, but based upon an answer given in Parliament by Minister of Petroleum Industries Susil Premajayantha in August 2012, Ameresekera estimated the cost to be in the region of Rs. 500 m. “Is this not indeed catastrophic, when compared to the fact that the Budget for the entire year’s operation of 2013 of the Attorney General Department is only Rs.434 m, and capital expenditure of only Rs.29.3 m, as per the Appropriation Bill 2012?” he stated in the letter.

It is interesting that the Government can move with the speed of light to impeach the Chief Justice, hold elections before their time, and impose changes to the Constitution, but even after the lapse of four years cannot press charges against the offenders of the hedging cases. The gross negligence has provided an atmosphere of impunity wherein mismanagement and corruption is flourishing within the Ceylon Petroleum Corporation (CPC).

In recent months, the CPC’s involvement with UAE-based Fujairah Petroleum Company that could cost the entity an estimated Rs. 1 billion, repeated purchase of low quality fuel, expensive leakages from pipelines, and the ever-present tender procedure fracas, have shown the depth of its problems and the Government’s incompetence in dealing with them.

It is blatantly clear that top officials have no interest in cleaning up the CPC and the public will continue to foot the bill for its excesses.

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.