As the crisis over the controversial oil hedging grew, the Supreme Court on Friday asked that Minister of Petroleum Resources A.H.M. Fowzie be stripped of his portfolio and for President Mahinda Rajapaksa to take over the ministry and consider appointing another minister.
The court also ordered the immediate suspension of Asantha de Mel, chairman of Ceylon Petroleum Corporation (CPC) and for the Treasury Secretary to act as the Chairman. The case will resume on December 10.
The 3-judge bench headed by Chief Justice Sarath N. Silva made this order while granting leave to proceed in the fundamental rights petition filed by Laugfs Gas Chairman W.K.H. Wegapitiya and a separate (similar) petition filed by Chief Incumbent of the Nalandarama Vihara, Nugegoda Ven. Theeniyawala Palitha Thera, UNP MP Ravi Karunanayake and Legal Coordinator of 'Corruption Watch' attorney Ravi Jayawardena as a public interest litigation.
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| Suspended CPC Chairman Asantha De Mel walks out after the hearing. |
The petitioners claimed their fundamental rights have been violated due to the oil hedging agreement of the CPC with two foreign banks and some local banks and, due to this, non-reduction of local fuel prices in line with world market prices.
The court also ordered the CPC to suspend hedging payments to the banks until an ongoing probe by the Central Bank into the matter is over. The court also ordered the Treasury to submit a report within a week on the possibility of reducing local fuel prices by reviewing the taxes levied on petroleum products.
These rapid events in the case capped a week of hectic activity primarily prompted by The Sunday Times exposure two weeks ago on the oil hedging deals where the CPC is liable to pay as much as $400 million in coming months for contracts that were one-sided.
The week saw a parliamentary probe committee including government and opposition legislators grilling the CPC Chairman; a presentation on the restructured deal being presented to the CPC and Cabinet sub committee by SCB; and the Central Bank sending letters to Standard Chartered Bank (SCB) and Citibank asking them to explain why laid-down guidelines were not following in the hedging deal.
During the court hearing, the Chief Justice was highly critical of the hedging contract which he said was in favour of the banks. The country has to pay US$675.7 million to the banks for the next nine months if this deal is allowed to continue, the Chief Justice said.
“This hedging instrument is worse than gambling as it has to pay for double the quantity of oil due to the failure to place a cap on the downside and (now) the oil price is coming down drastically,” he said. The people of this country should not be allowed to suffer due to this kind of deals which are beneficial for banks, he said.
The Chief Justice noted that the CPC Chairman’s statement made at the November 10 press conference that the government should honour the sovereign bond entered with the bank was unwarranted and he cannot make such a statement on behalf of the government.
The minister’s action to defend the CPC Chairman was also unbecoming, he said. The court blamed authorities for having appointed an unqualified person (Mr De Mel), who had not even passed the G.C.E. Advanced Level examination, to a responsible position like the CPC chairmanship, and said the ministers who had protected such a person should be exposed.
The Chief Justice pointed out that the CPC chairman has acted as the ‘mouthpiece’ of the banks at the press conference adding that the invitation was sent to media by the CPC on a Standard Chartered Bank letterhead. It seems that the SCB has put the word ‘honouring of sovereign bond’ into the ‘mouth’ of the CPC Chairman, he said. When asked by court, Mr de Mel accepted that he was asked by the SCB to make this statement to the media. The Chief Justice said that according to the CPC Act the revenue of the corporation cannot be used for various financial instruments like hedging as the Act clearly states that revenue should be used to purchase fuel following proper procedures.
Unfolding events this week
- Monday - Two Standard Chartered Bank representatives from overseas make a presentation to the CPC board and a Cabinet risk committee on a restructured hedge structure in which the CPC will still have to pay $250 million over an extended period
- Cabinet sub committee comprising Petroleum Resources Minister A.H.M. Fowzie, Investment Promotion Minister Sarath Amunugama and International Trade Minister G.L. Peiris appointed to study the hedging agreement.
- Tuesday - Parliamentary committee meets, CPC Chairman Asantha de Mel summoned. CPC Board of directors say they were not informed.
- Wednesday - Laugfs Gas files first of FR petitions
- Thursday - Parliamentarian Ravi Karunanayake and Corruption Watch, a group of professionals fighting corruption, file a joint petition
- Corruption Watch also hands over petition to British High Commission over Standard Chartered Bank (SCB) involvement in the issue
- Central Bank (CB) send letters to SCB and Citibank seeking explanation as to why CB guidelines were not followed in the oil hedging deals
- Friday – Supreme Court hears Laugfs Gas petititon over oil hedging and CPC, and acts against Petroleum Resources Minister A.H.M. Fowzie and the CPC Chairman.
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