A high powered committee has been re-activated by the government to commence negotiations and reach a settlement with the Ceylon Petroleum Corporation (CPC) and the banks on the oil hedging agreements, The Sunday Times reliably understands.
The 4-member committee comprising Minister of Public Administration and Home Affairs Dr. Sarath Amunugama, Minister of Export Development and International Trade Prof. G.L. Peiris, Minister of Healthcare and Nutrition Nimal Siripala de Silva and Minister of Petroleum and Petroleum Resources Development A.H.M. Fowzie met for the first time on Thursday even though they were appointed in November 2008 to study the agreements when the hedging contracts became headline news.
Despite these planned negotiations, CPC sources said they have been instructed by the Attorney General's Department not to make payments. Furthermore imports of fuel continue to be handled by the Treasury under an earlier Supreme Court ruling when the petitions against the oil hedging contracts were being heard. Last month the Court vacated the interim orders in the case since the government was not implementing or delaying to implement a court decision on fuel pricing. The CPC may now have to pay up to $800 million in losses on allegedly one-sided deals favouring the banks.
The Central Bank (CB)'s statement released last week, instructing banks not to proceed with the transactions following a CB investigation into the hedging contracts, has left some in precarious situations. A hedging expert said the CB does not have the authority to prevent the CPC from honouring its contracts with the banks but can and has prevented the local banks from honouring their contracts with their foreign counterparts.
Sources said the People's Bank is facing severe difficulties because overseas banks are treating the bank as defaulters resulting in the inability to open letters of credit for their clients.
Sources said even the Ceylon Bank Employee's Union (CBEU) has been concerned with the state of play at People's Bank because they have members there. Sources at banks, involved in the hedging contracts, also informed The Sunday Times FT that they are disputing the CB's claim that the hedging contracts were tainted and have asked the CB to provide the incriminating evidence. No reply has been forthcoming from the CB for over a month. Citi Bank has already filed action for arbitration overseas.
However the CB’s Director of Bank Supervision B.D.W.A. Silva told The Sunday Times FT that the CB has sent all banks a report on the findings of the CB's investigation 'some time back' and that the banks have informed the CB they will reply. He also said he was unaware that the government committee had reconvened and that the CB will have to wait and see the outcome of the negotiations.
|
E-mail