The government of Sri Lanka has been ordered by an international arbitration tribunal to pay nearly Rs.4 billion, Rs. 3 billion possibly in cash, to Prima Ceylon Ltd.
The Prima company had petitioned the tribunal, claiming the government owed this amount as subsidies and other payments in terms of an agreement signed in 2001.
The company said subsidies amounted to about Rs. 2.8 billion and other payments more than Rs. 1.15 billion.
Prima had claimed a total of Rs. 15.4 billion from the Sri Lankan government, but was awarded only about Rs. 4 billion. The government has so far paid about Rs.1 billion to the Prima company.
Trade sources said the government was hoping to pay the balance through treasury bonds or bills but Prima was insisting on cash payment. Prima has filed another court case for the enforcement of the arbitration ruling and to collect the rest of the payment.
Prima Managing Director Tan Ben Chuan yesterday declined to confirm or deny the payments. He said keeping with company policy he did not wish to comment.
The company's original claim on subsidies filed in January 2006 was Rs. 5.8 billion, substantially higher than the Rs. 2.8 billion set forth in the award.
The other claims by Prima include a failure to maintain a level playing field when the government allowed Serendib Flour Mills to be set up within the Port of Colombo. Although Prima claimed Rs. 5.5 billion in damages and Rs. 422 million annually as future damages, the tribunal refused the claims and instead determined that damages in a sum to be assessed by the tribunal will be awarded.
Prima will be entitled to an apportionment if and when Serendib begins operations, according to the award by the tribunal.The tribunal comprised Sir Anthony Evans (Chairman), Justice G.P. Selvam and Justice P.R.P. Perera. Counsel for the Claimant (Prima) were Michael Khoo, Josephine Low and Ong Lee Woei. Counsel for the government of Sri Lanka were Senior State Counsel Viraj Dayaratne, Senior State Counsel Arjuna Obeysekere and State Counsel Mahan Gopallawa.
Prima claimed that the government failed to maintain a 25% tariff differential on imported wheat grain and wheat flour. It claimed Rs. 2.4 billion but the amount awarded was about Rs. 180 million. Prima also
claimed more than Rs. 4.5 million in export rebates and the entire sum was awarded to it.
Prima further claimed about Rs. 28 million in tax liabilities on interest income and the entire sum was awarded to the company.
Prima asked for Rs. 83 million in Economic Service Charge (ESC) and this sum was also awarded to the company. Moreover, the company claimed Rs. 7.1 million and Rs. 230 million in Value Added Tax (VAT) and Goods and Services Tax (GST) and was awarded the entire sum.
The troubled history: The vice behind the wheat:
Prima's history in Sri Lanka has been tainted with accusations of bribery and corruption, several incidences which have been documented in The Sunday Times over the years.
In November 2008, The Sunday Times reported that an alleged false customs declaration by the shipping agent of Prima flour company may lead to the forfeiture of Rs. 3.2 billion worth of wheat and the seizure of the vessel that carried the cargo to Trincomalee.
We reported that according to a customs inquiry, the government would have suffered a loss of more than Rs. 200 million, if the cargo had been cleared. The vessel and the wheat for Prima, the biggest flour producer in Sri Lanka, were seized by the Customs at the Trincomalee harbour pending investigations.
Documents to clear the consignment shipped by the Canadian Wheat Board to Prima had been submitted before the shipment arrived at the Trincomalee harbour, though the usual practice was that the documents should be handed over after the shipment arrived. The documents were produced two days before the budget in which a cess was imposed on wheat imports.
The ship MV Boreal was carrying 72,000 metric tonnes of wheat, of which some 9,000 metric tonnes were due to be unloaded in a port in Singapore, a port which the ship had passed by on the way to Colombo.
Customs officials said they found that the documents were not in order and ordered the seizure of the entire consignment valued at Rs. 3.2 billion and the ship.
In October 2007, The Sunday Times reported that UNP MP Ravi Karunanayake denied government accusations that he took a bribe of Rs.1 billion to add section 77 to the Consumer Affairs Authority Act no.9 of 2003, and thereby help the country's wheat import monopoly of Prima to fix prices.
Mr. Karunanayake then said he was suing Minister of Trade and Consumer Affairs, Bandula Gunawardena, Media Minister Anura Priyadharshana Yapa and Non-cabinet Minister of Power, Mahindananda Aluthgamage for Rs.3 billion each for allegedly making reckless accusations.
Earlier that week in 2007 at a post cabinet news briefing, Minister Priyadharshana Yapa accused 'some one in the UNP' of taking a bribe to add section 77 which would allow companies such as Prima Ceylon Ltd to dictate its own pricing while minister Aluthgamage said details of a deal between Mr. Karunanayaka and the Prima to provide them the special facility had been disclosed. However, Mr. Karunanayake said the section was added to the Act in 2001 by the then Trade Minister Rauff Hakeem and approved by the then Secretary Treasury P.B. Jayasundera. |
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