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| Oil
puts UPFA in frying pan They survived. And now, with the support of the CWC, they have a majority as well. The down-side, however, is that the new Government has had to face the brunt of rising world crude oil prices. Helplessly, they watch as prices soar. Embarrassed, they avoid saying much, and if they say anything at all, it is something stupid like " UNP officials at the Central Bank are responsible for the mess we are in ". While the Government has been stunned by the turn of events, especially on the economic front, the Opposition's deafening silence to the silent cries of the people has been more of a talking point. Their apparent disinterest in making any protest or mounting any campaign only confirmed their aloofness from the ordinary people, which cost them the April election. Now, after a painfully long gestation period they seem to be just about waking up from their slumber. The official excuse trotted out is that, as a responsible Opposition they have given the new Government time and space to get their act together. Not a bad excuse, but time has run out for the UNP to show that they care. One of the fundamental decisions the UNP has now made is that "Street protests", more than Parliament, will be the focal point of their future campaigns. This is a significant decision for the party to have made. So bad was their inactivity, that just a fortnight ago they were exhorted by the JVP, and the Prime Minister, to get engaged in demonstrations against the soaring cost-of-living. That was tantamount to the ultimate insult. Spurred on by this insult, the party organised a demonstration opposite the Colombo Fort railway station last week that brought out some 5,000 people, mostly party workers, but at least it was like a test-run of a once well-oiled but now unused car. A protest at Lake House was another test-run. The UNP has probably seen Parliament, where they held on to a majority in the Opposition until the CWC crossed-over, the unlikely place to overthrow a Government. Their leadership has felt that the UPFA Government should be permitted to present its maiden Budget in November, believing as they do, that the Budget will only plunge them deeper into the mire. And they go on the basis, that the Government needs a majority everyday, while the Opposition needs it only once. Pressure will come from the grassroots is a belief the UNP has finally come to accept. Towards this new strategy of mass mobilisation, turning the UNP back into a successful peoples' party a la 1977 under the stewardship of their great leader, Junius Richard Jayewardene, they have appointed a committee of trade unionists to lead the fray. JSS trade unionist and former Tourism Minister Gamini Lokuge, a protégé of the Cyril Mathew school of agitation, and who sat in the discussions under the tutelage of pundit J.R. Jayewardene, chairs this committee. The old-guard in the committee will be represented by John Amaratunga and Gamini Jayawickrama Perera, a long over-looked politician from Kurunegala, while the relative new-comers include the left inclined Rajitha Senaratne, the former Lands Minister who once was a political colleague of Chandrika Kumaratunga long before she became President, and Tissa Attanayake, who has been made the assistant secretary of the party as well. S.B. Dissanayake will also be a key player in this campaign. Party leader Ranil Wickremesinghe has also come out now to the open. Shaking off a bad cough that seems to afflict all and sundry owing to the inclement weather, he spoke at a party session at Soysapura in Moratuwa earlier this week where he traced the reasons for the defeat of his party, the problems of the new Government, and spoke of the need for a country to have a fixed policy with a set policy framework for 10 years if it needed to progress. At the Question and Answer session that went on to the early part of the evening that day, the UNP leader explained that most economically developed countries have a two-party system, but the basic foundations are common. In Sri Lanka, he said, it was a case of a UNP Government and an anti-UNP Government, rather than on basic principles. He said that the UPFA Government itself had twin-policies, a matter that is being exploited by UNP spokesmen at various tv chat-shows. Wickremesinghe brought out the example of Power and Energy Minister Susil Premajayantha not knowing about fuel price increases. He said that in 1947, when Sri Lanka obtained Independence, Sri Lanka (then Ceylon) was on par with Japan. By 1965, we had been on par with Singapore and Malaysia. By 1977 with Thailand. Gradually, we kept missing the bus, while those countries raced ahead with a common platform for economic development. While the UNP leader's arguments had sound validity, when he says that he hopes to bring Sri Lanka to the standard of Singapore or Japan, it may have meaning in Moratuwa. How much it means to most of Sri Lankans has always been the question, not the answer. It is almost like talking of Nirvana. And talking of Nirvana, the UNP has also launched a simultaneous campaign to arrest the theory trotted out by the UPFA, especially the JVP, that it is an anti-Buddhist party. Today, Ranil Wickremesinghe has an article under his name in the Irida Divaina under the title ' Deshapalanaya saha Dharmaya ' or Politics and the Dhamma. There, he outlines the historical aspects of the UNP, its early support for Buddhist renaissance, its battles with Marxism, and the post-Marxist stage. He goes on to take a dig at having to re-build the sacred Temple of the Tooth after LTTE rebels bombed it (during the former PA regime), and how the UNP used the ceasefire to renovate many other temples (such as the famous Somawathi Chaitiya on the borders of Batticaloa). The article says the Buddha had his own doctrine for Corporate Good Governance, and that these were neither in tune with capitalist theories expounded by Adam Smith nor Karl Marx's socialist principles, but on issues like the rejection of craving (thanha), the need to avoid indebtedness etc. He goes on to say that ancient Anuradhapura developed on Buddhist philosophy through technological advancement and that the UNP's right-wing economic policies are not incompatible with the teachings of the Buddha. The thrust of the UNP's multi-pronged campaigns seem to show that the party has at least now, having licked its electoral wounds, re-assessed its position in the eyes of the voters of this country, with a view to re-grouping the mass support it always had in the country, but which rapidly turned away from it, sometimes justifiably, sometimes by the cute campaigning of its opponents. In the meantime, the oil crisis is going to be the most hurtful thing to happen to the UPFA Government, so much so that some within the Government are openly wondering whether the timing was right for the President to have dissolved the previous Government, and whether the troubles they are facing should not have been heaped on the then UPFA Government instead. Tim Eisbad, a somewhat irregular columnist of The SundayTimes sent us the following piece, which we thought of reproducing in these columns. He goes into detail on issues that have split open the fledgling UPFA Government - the privatization of the Ceylon Petroleum Corporation where the JVP leaders say they will get on the street if the privatization process goes ahead, while the PA elements in the Treasury say whosoever may wish to get on the street, they may do so, but privatization will take place, come what may. Eisbad's article is heavy reading, and quite technical in some aspects. But a reader may be able to come to grips with what's happening in this important area, which not only affects the daily lives of millions of Sri Lankans, but also has a bearing on the UPFA government, and the country at large. This
is what he has to say: "Our ministers, and has-been diplomats fly to Geneva expecting Iran/OPEC for help as if we are the only starved star in the orbit. Experts say a 10% cut on fuel usage can save upto Rs. 12,000 million, but in Sri Lanka, adjusting domestic policy to meet adverse market demand is not a priority. Alas, the government has had the courage to raise the prices of petrol and diesel, but in the months to come, with international prices expected to rise further, it's not only bad news for our motorists, but for our economy as a whole. "With the privatization of the petroleum industry and the entry of Indian Oil (IOC) into retail selling of petrol, diesel and kerosene, one expected the consumer to benefit (as we were told then), in the form of prices, services and the refurbishment of gas stations upto modern standards. Enormous amounts of money has been poured by Ceylon Petroleum Corporation (CPC) and IOC to improve the pathetic state of the sheds that existed, and it is true to say, that the general standard of service has also improved since privatization. However, prices have escalated ever since the entry of IOC, much to the consternation of our consumers. "In the meantime, the entry of the so-called third player has created controversy and confusion since the advent of the present government. This is a third partner to the Sri Lankan Petroleum scenario. The UNF government began negotiations with Sinopec, the Chinese government's Petroleum giant as it had offered US$ 88 mln (US$ 13 mln more that IOC for a lesser share of the market) for 1/3 share of the CPSTL company (which own the pipelines, the go-downs and the depots i.e. all the infrastructure) plus 107 CPC owned petrol stations in the country. "The negotiations were handled by no lesser a person than the present Treasury Secretary P.B. Jayasundera who was then acting as a Consultant to PERC. In fact, it was Dr. Jayasundera who had negotiated and sealed the IOC deal as Chairman of PERC under the UNF government. When bids were closed for the third player, only three parties emerged as serious contenders, i.e. Sinopec of China which offered US$ 88 mln. and two Indian Govt owned companies, Bharat Petroleum (US$ 82 mln) and Hindustan Petroleum (US$ 79 mln). PERC prepared a Cabinet paper to award Sinopec, the highest bidder, thrid player position when elections intervened in April this year, and governments changed. "When the UPFA took over, Dr. Jayasundera was elevated as Treasury Secretary, but he was forced to change the goal posts in keeping with the election promise of the UPFA. Non-privatization of public assets became a political issue, especially of the JVP. Innovatively, he came up with the idea that whilst the 1/3rd share of CPSTL shall be sold totally to the third player, only 49% of the Retail Outlets will be sold and the Government (GOSL) will continue to hold the balance 51%, following examples of SLT (Sri Lanka Telecom) and Sri Lanka Airlines privatization model. This indeed was to overcome the JVP infested CPC unions which by this time were warring with the new Power and Energy Minister Susil Premajayanth (joint secretary of the UPFA) and the Treasury, that no further privatization should be carried out in keeping with the promises given at election time. "In fact this ploy was badly exposed by the CPC unions recently and ended up with the unions asking for the Treasury Secretary's head! An official for the consulting company KPMG Pete Marwick said under anonymity, that "the UPFA government lost a golden opportunity when they allowed the bid of Sinopec to lapse on 31st May 2004". 'The synergy of having the IOC which belongs to the Indian government and Sinopec which belongs to Chinese Government, and with CPC holding the balance share would have been ideal for Sri Lanka and its national interests for the future,' he said. "He added that 'a strategic commodity such as Petroleum must not be allowed to be in the hands of the Indians alone, however attractive their offers be, because sometime in the future, should relations between the two countries be strained for whatever reasons, the Indians could literally close the tap on us'. "It should be further noted that the Congress government in India is currently contemplating amalgamating IOC with Bharat Petroleum (the prospective 3rd player) which would mean that IOC would automatically own 2/3rd of the Sri Lanka market, were this to happen. "To
add fuel to the fire, the minutes of a recent meeting between Shri
D.I. Gupta, Finance Secretary, GOI (Government of India) and Dr.
P.B. Jayasundera, Treasury Secretary held on 5.7.2004 in New Delhi
have already appeared in the local press. The relevant parts read:
- India would offer a Line of Credit of US$ 150 million for the purchase of petroleum products from Indian Public Sector oil marketing companies on term contract. This would be in the form of an Exim Bank Line of Credit. It would be a fast disbursing loan, with the first installment to be made available in about two months time, The rate of interest would be LIBOR plus 0.5% payable half-yearly. The total repayment period would be 7 years, including a moratorium of one year. Government of Sri Lanka would consider creating as escrow account to take care of repayments. Government of Sri Lanka will begin settlement of IOC subsidy claim next month and will take necessary measures to clear the outstanding amount of about US $ 14.1 million expeditiously. Government of Sri Lanka will reiterate its instructions to Ceylon Petroleum Corporation (CPC) to undertake oil purchases through term contracts, in view of the significantly lower cost of a term contract as against spot purchases. Government
of Sri Lanka will take an early decision on the bids invited for
retail marketing of oil products in Sri Lanka The Indian side also anticipated similar problems regarding export of vegetable oils and vanaspati from Sri Lanka. The Sri-Lankan side offered full co-operation in curbing third country exports through Sri Lanka particularly in the agriculture sector and verification of rules of origin in other sectors. It was agreed that the customs authorities of both sides would meet in the near future to work out how this co-operation can be given a formal shape. The
responses to this could be itemized as follows - The only public sector companies in India who can perform a term contract are Indian Oil Corporation Ltd. (IOC), Bharat Petroleum (BP), Hindustan Petroleum (HP) and Oil and Natural Gas Corpn. of India (ONGC). Of the 4, upto now the main exporter of product has been IOC. Although the financial terms in the said letter is attractive, it is not known at which level CPC will be asked to purchase the Petroleum products. On all recent "spot" tenders, India's largest private sector refiner, "Reliance Petroleum" have by far been the lowest. Therefore, to insist that the credit line be restricted to public sector oil marketing companies, in simple terms mean, CPC must purchase product only from IOC. The trade is aware that IOC cannot compete with the prices offered by Reliance. There is no point giving attractive financial terms, if the product prices are going to be high. 2 (ii) The Sri Lanka Government presently owes LIOC (IOC's local arm) approx. Rs. 2.3 billion as subsidy upto the end of Aug. 2004. This clause materially means that the Sri Lanka Govt. will be borrowing US$ 23 million (from the credit line of US$ 150 million) to pay back the Indian Govt. who owns IOC. In other words, you are borrowing from Peter to pay Peter. Usually a credit line is used to finance a tangible product or project! Whilst LIOC will be paid their subsidy dues, CPC which is owed nearly 4 times that owed to LIOC, will be disadvantaged as the Treasury has no money to pay them. CPC has been instructed by the Treasury to borrow funds from the Bank of Ceylon and the People's Bank for this purpose. Thus, CPC would have to, bear an additional financial cost which LIOC wouldn't have to, making CPC uncompetitive in the market. 2 (iii) This clause is simply un-commercial. Why should GOI insist that oil purchases be on 'term contrac' when there are many instances where'spot' purchases on tender have been cheaper than the levels offered on term contract. Can GOI guarantee that the term contract price offered will always be cheaper than what CPC can buy in the "spot" market? 2 (iv) This refers to the entry of the 3rd player Bharat Petroleum (BP) into the Sri Lanka market. In fact, it is a condition of this credit line, to give this business to Bharat Petroleum which is also owned by GOI. The selling price is reported to be in the region of US$ 50 million, as opposed to US$ 88 million which was offered by Sinopec of Govt. of China. Even if the selling price is higher, what is important to note is that GOSL would be giving 2/3rd of the Sri Lanka Petroleum market (both retail and wholesale) to two Indian Govt. owned companies, IOC who are already here and now to, Bharat Petroleum. This would also mean that 2/3rd of infrastructure of the Petroleum industry in Sri Lanka, which includes the pipelines, go-downs, the depots, tankage in Muthurajawela and Kolonnawa, will now belong indirectly the Govt. of India whereas, CPC will own only 1/3rd. Should the relations between India and Sri Lanka in some future date sour for any reason whatsoever, control of a strategic commodity such as Petroleum will be in the hands of the Indian Govt. This is can always be strategically dangerous for Sri Lanka. 2(v) ONGC (Oil and Natural Gas Corporation) owned by GOI have made a proposal to GOSL to obtain exploration rights in the entirety of Sri Lanka waters. The previous UNF Government had indicated its agreement to the offer of ONGC where only the waters above the Mannar region will be granted to ONGC on the grounds that ONGC have been carrying out similar work in the area and are in the best position to carryout such exploration. With the agreement signed between the Secretaries, it is anticipated that ONGC would make a formal request from GOSL, to secure rights for the entire waters around Sri Lanka. Granting such an area will not be possible as Sri Lanka has already signed an agreement with a Norwegian company who has undertaken to do seismic surveys and other data gathering at no cost to CPC or to GOSL. If Sri Lanka grants the request of ONGC for the entire area, India would not only control the downstream marketing of Petroleum products in Sri Lanka but also, its production. Since the chances of finding natural Gas in the said waters are pretty high, a better proposition for Sri Lanka would be to invite international exploration companies who could offer better terms and conditions than ONGC, through an opening bidding system as was envisaged by the previous government. 2(v)
& 2(vi) These are not applicable to the Petroleum sector. Don't be too surprised if you find the JVP also going quiet on this 3rd player business. No doubt, its trade union leader Lal Kantha will be quite embarrassed if they do abandon their fight on behalf of CPC workers. After all, he took the credit for spearheading the lightning strike some weeks back. But the JVP's cosiness with the Indian authorities under the leadership of Somawansa Amarasinghe - despite its one-time anti-Indian campaigns under the leadership of Rohana Wijeweera (1971 and 1987-89) - is now well-known. So much so, that despite not accepting Foreign Minister Lakshman Kadirgamar's invitation to the formal dinner to bid farewell to their great supporter the former Indian High Commissioner Nirupam Sen, their two leaders Tilvin Silva and Wimal Weerawansa turned up at a lesser reception, the farewell for the Mission's popular political officer Tharanjit Sandhu at the same Taj Hotel, only a few weeks later. Don't
be too surprised if the JVP begins to play down this 3rd player
privatization role if the award is going to an Indian company. It's
just that they will find it awkward to face the Chinese as well,
with whom they have also struck a new rapport. |
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