Business Times

On CEB debt and governance at risk

Recently the Minister of Power and Energy Patali Champika Ranawaka claimed that the Ceylon Electricity Board (CEB) had cleared the decks of its accumulated losses over the years and turned up 2010 with profits.

Hard to believe but it’s a fact – all because the Treasury bore the losses between 2000 to 2009 of Rs 116.9 billion which included dues owed to the Ceylon Petroleum Corporation (CPC). Ranawaka’s March 10 statement drew a following-day response from Minister of Petroleum Resources Susil Premajayantha under whose watch comes the CPC. The latter said the CEB ‘profitability’ was because the CPC absorbed the losses on non-payment of dues, and that any government agency can declare profits in such an arrangement.

However, according to our story on the previous page, the Treasury is providing bonds to the CPC to cover the non-payment of dues during 2000-2009 while payments due in 2010 have been paid in early 2011 and all (current) purchases for 2011 are being paid.

Understandably if the CPC is also to make sure payment comes from all state agencies and it sells at a profit without any subsidy or high taxation by the government (the sale price includes government taxes as high as 50-60%), it could also claim profits.

While the two ministers will have a field day on their claims and counter-claims, Ranawaka’s statement that the consumer wouldn’t be burdened by high power costs (because subsidies to government agencies and non-payment of dues are often passed onto consumers through rates), may not hold water if rates don’t come down or are maintained at current levels.

That’s because the CEB relies on a combination of (cheap) hydro power and (costly) thermal power and limited supply of renewable sources of energy though the Norochcholai coal-fired power plant comes on stream on March 22 which as reported on this page would reduce the nation’s power costs.

For, there are other global issues emerging. Fuel prices are rising and gone over the $100 per barrel level and, at the same time due to the nuclear crisis in Japan following the twin crisis of an earthquake and a tsunami, the world is seriously rethinking the goals and objectives of nuclear power. Already Germany says it won’t build any more nuclear reactors; Venezuelan President Hugo Chávez has said they are suspending plans to build a nuclear plant with Russian help; South Korea and Israel have both said residents are worried about plants in those countries while only the US is believed to have categorically declared that their plants are safe from any natural disaster.

The latest worry over nuclear energy could put pressure on fuel prices and increase demand as a shift takes place, at least in the interim period. If this happens, it would hurt the government’s plans to provide electricity to all in the next few years and increase the CEB’s burden. With rising oil prices, demand increasing if major consumers shift their nuclear power purchasing to other fossil fuels, and Middle East turmoil impacting on supplies and production, the world will once again be in a bind over oil prices. Hard indeed then to believe the CEB won’t burden the consumers with high prices.

Governance and transparency
We return to this topic (our hobby horse, readers would say) unable to keep our pens or rather computers down the way the government is doing things in the country. This week we have another story about the flawed tender process for the Kuchchaveli Tourism Zone in the Trincomalee district. Here proposed investors and businessmen from the area spent their time and money in submitting proposals nearly 16 months ago when the government advertised calling for proposals for long-term leases of designated properties for tourism development.

Now the government or rather the tourism authorities have changed track and are singing a different tune. Again these changes, like many others, are not made public and only reaches the media when the aggrieved parties are desperate and have nowhere else to go and no one to appeal to.

Tourism, though on paper looks hunky dory, has raised some serious governance and transparency issues. The Kalpitiya Tourism Zone development has become a hotbed of controversy with bids being called on a lease basis and cancelled, and the rules changing to acceptance of outright purchase offers.
Then take the three hotel projects coming up in the Galle Face Green area near the army.

grounds/headquarters. All these were direct contacts with the government, related parties or those close to the powers-that-be. While there has been all kinds of statements made on the cost of these projects or value of the land, there are contradictions between the official statements and actual values. For example, it was said that the Shangri-La project in Colombo was worth $500 million but another ‘official’ statement said this figure was for both Colombo and a Hambantota where another Shangri-La hotel is coming. Shangri-La has so far paid $76 million for the land in Colombo.

The ground for a hotel-cum-shopping mall project given to a Chinese aircraft manufacturer is being rapidly cleared but very reliable sources say the money for the land ($125 million) is yet to be paid. Furthermore no Environmental Impact Assessment (EIA) compulsory for any project which has waste disposal and environmental pollution for the location to be approved has been submitted by these projects, as our story shows.

Clearly, clearly the government needs to get its act together and be more transparent – that is if there is nothing to hide from the public.

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