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Govt. siphoned out millions from LRC fund for failed organic fertiliser project
The Land Reform Commission (LRC) is yet to recover millions of rupees taken “illegally” from its official fund to support the government’s failed organic fertiliser project, the Sunday Times learns.
In July last year, Lands Minister S. M. Chandrasena announced that Rs 700mn would be released for an organic fertiliser production project to be implemented by the LRC under his ministry. He said the fertiliser would then be sold to the Agriculture Ministry with the proceeds being reinvested in producing still more organic fertiliser. The initiative received Cabinet approval.
But documents received by the Sunday Times, including a written opinion dated June 2021 delivered by the Commission’s Director (Legal), show that the transfer of monies from the Rs2bn worth LRC fund was against the LRC law which defines the purposes for which it can be used.
“The manner in which money can be spent is clearly defined in section 54 (3) of the Land Reform Act,” the Director Legal has notified the Commission in a letter before the LRC’s board controversially approved the release of the funds for the organic agriculture project.
Constitutionally, therefore, the Commission only has the authority to use the monies “to defray the expenses incurred by the Commission in the exercise, discharge and performance of its functions, powers and duties under this law or any other written law and all such sums of money as are required to be paid out of the fund by or under this law”.
The LRC has no legal authority to invest funds in profit-making ventures or to have these reimbursed to it. Section 44, which defines its powers, precludes it from charging monies for anything other than services the Commission renders in carrying out its business (which includes acquiring, holding, taking or giving on lease, hiring, exchanging, mortgaging, pledging, selling or otherwise disposing of any movable for immovable property).
Further, the project implementation was to take place on a large number of lands that did not belong to the LRC. This, too, was in contravention of the law.
The Legal Director’s opinion had been sought on what avenues were available to the LRC to recover the monies once released. He conveyed that the LRC will face various impediments in trying to secure legal legitimacy to any transaction that had no basis in law, to begin with.
The proposal to release Rs 700mn for President Gotabaya Rajapaksa’s organic fertiliser drive was presented to the LRC by Minister Chandrasena in May 2021. His memo states that it will kick off in the North Central Province and spread to other areas.
It also outlines the purposes for which at least Rs 20mn of the monies will be used. They include the purchase of machinery and vehicles on lease, construction of buildings, salaries for staff, and maintenance of machinery. A mere Rs. 0.2mn has been allocated for “purchase of raw material”. None of these are activities defined under the Land Reform Act. They are not directly connected with the powers, duties and functions of the LRC.
The Lands Minister’s proposal was backed by then Prime Minister Mahinda Rajapaksa, as Finance Minister, then Agriculture Minister Mahindananda Aluthgamage and then Irrigation Minister Chamal Rajapaksa.
On June 7, 2021, Prime Minister Rajapaksa presented a Cabinet memorandum seeking approval for a pilot project to manufacture organic fertiliser through 35 projects in 29 divisional secretary areas in the North Central province.
“Commence it and incur expenses for the said purpose as per the Section 22 (1) (d) and 54 (3) of the Land Reform Commission Act and to establish a revolving fund having reimbursed the said funds,” the memo states.
These are the very sections that the LRC’s Legal Director warned the relevant proposal would violate. The memo also said lands owned by the State, the LRC and Mahaweli Authority would be used. On June 16, 2021 (the day after the Legal Director’s opinion was dated) all LRC members endorsed the proposal.
While Minister Chandrasena said he expected to provide the Agriculture Ministry with 300,000 metric tons of organic fertiliser by September this year, progress was not immediately clear. LRC sources confirmed that, months after the announcement was made, no monies have been reimbursed to the Commission’s Fund.
“The fund was set up only to support activities relevant to the LRC,” a senior legal source told the Sunday Times on condition of anonymity. “You can’t invest it in tourism, agriculture, healthcare or anything else. But the Government wanted money for fertiliser so it was siphoned out of the LRC fund. They prepared a Cabinet paper in the hope of legitimizing it. The LRC board approved it. But nobody had any mandate to transfer money from this fund for the organic fertiliser project.”
“If you tap into funds saying Cabinet has approved, the same can be done of the Employees’ Provident Fund or the Employees’ Trust Fund,” he pointed out. “Meanwhile, the Cabinet paper says it had to be repaid to LRC in three months. Not a single payment has been made.”
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