Mind your Business
Cool corporate captains
Part of the solution to the economic stagnation is to put loss-ridden state
institutions in the hands of captains of industry with a proven track record,
the green leadership seems to believe.
For starters one such man has been asked to oversee the powerful Board
that is supposed to scatter light but is now plunging the country into
More such appointments are on the cards and feelers have been sent to
many corporate big wigs with invitations to join the ship of state enterprise.
Solar for solace
And still on the subject of power, those who matter have concluded that
thermal and hydropower will never suffice to meet the country's energy
needs in the near future.
So, a decision has been taken to tap a cheaper source - solar power,
especially to cater to far-flung remote regions.
And this venture, we hear, will be entrusted to the private sector with
the state doing its bit by offering generous tax concessions to investors
willing to take the gamble.
Year of the Bull
The Bull did begin to run after the green win but then stopped dead in
its tracks at the Colombo bourse.
But come the New Year and brokers expect the market to take off. There
is general optimism and satisfaction about the way the greens have performed
so far and the ceasefire has nudged overseas players, they say.
But most importantly, key institutional players are poised to make big
buys, driving the market upwards, we hear.
Fuel imports to be liberalised
The United National Front (UNF) government, in a bold move, is planning
to open the entire distribution and marketing of fuel, including diesel
and petrol, to the private sector.
"We are freeing this segment from government monopoly and will make
a formal announcement soon," an authoritative government source told The
Sunday Times Business. The state-run Ceylon Petroleum Corporation (CPC)
is the sole importer of diesel, petrol, marine bunker fuel and aviation
The source, who declined to be identified, said under the planned reforms,
the CPC would act as a stabilising factor in the market instead of a monopoly.
"Anyone can import, sell and have their own filling stations creating competitive
pricing and helping the consumer," he said, recreating an era in the 1960s/early
1970s when multinationals like Shell and Caltex ran fuel stations.
He said the private sector involvement in fuel imports and distribution
might not be immediate as necessary infrastructure like storage facilities
and separate pipelines from the port is required for this purpose.
"We could, however, use the disused Trincomalee tank farm if we can
put it into shape quickly – in three to six months. That would also create
jobs in that region," he said.
In a bid to cushion the rising cost of living, the CPC on Friday was
scheduled to announce price cuts in diesel and petrol as world market prices
are falling. Government officials said the CPC would henceforth pass the
benefit of low world market prices to the consumer in addition to keeping
a margin for debt servicing. "It's a good time to invite the private sector
with world prices falling," an official said.
Finance Minister K.N. Choksy said last week that losses incurred by
the CPC, Ceylon Electricity Board and CWE (Co-operative Wholesale Establishment)
exceed Rs. 50 billion.
The move to free fuel from state control is in line with IMF reforms
and may help the government in negotiating a fresh deal with the IMF, economists
The government source said an IMF mission is expected next month to
discuss the reforms process. "The negotiations are going to be tough,"
he said, adding that the IMF had sent a strong signal to the government
that it doesn't want empty promises – like in the past – but would like
to see action and reforms in place.
"There are positive signs from the government but we have seen announcements
like this in the past and little action. We would like to see some action,"
observed Dr. Nadeem Ul Haq, IMF representative in Sri Lanka, when asked
for his comments on the reforms process.
The IMF's standby facility has been on hold since September due to the
government breaching several targets set by the original stand-by loan
agreement. Choksy has said the government would re-negotiate the agreement.
The source said that wheat prices went up by Rs. 3 per kg on Thursday
as a state subsidy to Prima Ltd had to be abandoned. This hike would raise
prices of bread and other wheat-related products.
"Prima asked the government permission to increase prices about two
weeks before the polls. That was turned down and instead a costly subsidy
of close to Rs. 300 million was given to Prima which we can't afford,"
the source said.
He said the first shipment of Indian wheat, negotiated during a visit
to India by Prime Minister Ranil Wickremesinghe, was expected around mid-January
in the form of flour, not grain.
"Prima has informed the government that it is unable to mill the grain
immediately. Import of flour can be sent to the market directly," he said,
adding that there could be a price reduction in the next few months. India
has offered to supply 300,000 tonnes next year on easy payment terms.
RRI chief urges caution on oil palm
Replacing rubber plantations with oil palm without serious scientific study
could damage Sri Lanka's environment and economy, Dr. L.M.K. Tillekeratne,
director of the Rubber Research Institute (RRI) said.
Rubber is more versatile and has greater potential for value addition
than oil palm, he said in a paper on oil palm as an alternative crop for
Attacks in October on oil palm plantations in the southern region by
politically-motivated interests brought into sharp focus the benefits of
such a crop for Sri Lanka.
Trial plantations of 3,000 acres of oil palm set up in rubber growing
areas should not be extended without carefully considering all the effects
of such a move, and without consulting the RRI, he said.
Dr. Tillekeratne said that although the rubber industry had suffered
in the last two years because of lower demand for tyres in Western markets,
it had a "bright" future. The price of palm oil, he added, has been falling
faster than that of rubber during the last couple of years.
Planting of rubber in hilly areas had minimised soil erosion and the
crop also helped protect the environment by providing forest cover, he
Rubber helps protect the remaining forest reserves by catering to the
firewood requirements for domestic cooking and industry as well as providing
timber for use in the furniture and construction industries, he said.
"But from the trunk and branches of oil palm no other uses have been
reported," Dr. Tillekeratne said adding that the only value addition possible
in the palm oil industry was to convert the oil into margarine and soap.
He referred to a "scientific organisation" that has given a report on
replacing rubber with oil palm, saying that even this report has recommended
restricting oil palm to an area just enough to meet the local palm oil
needs which are imported from Malaysia. Uprooting 5-6 year old rubber trees,
even before marking the trees, to replace them with oil palm is a "national
crime," he said.