Cabinet of Ministers kept in the dark Rumblings within government ranks A caucus within ruling alliance calls for relief measures for poor Relaxation of measures against COVID-19 may lead to more revenue ‘Carnival’ of contradictions continues Sri Lankans — men, women and children now confined indoors due to the lockdown — were mostly asleep when [...]


The pitfalls of the major fuel price hike


  • Cabinet of Ministers kept in the dark
  • Rumblings within government ranks
  • A caucus within ruling alliance calls for relief measures for poor
  • Relaxation of measures against COVID-19 may lead to more revenue
  • ‘Carnival’ of contradictions continues

Every cent counts: The worst affected by the Covid-19 travel restrictions are the country’s poor. For them, last Friday’s fuel price hike was too much to bear. Many poor people rushed to buy kerosene hours before the price increase came into force, so that they could save some money to buy other essentials. Pic by Akila Jayawardena

Sri Lankans — men, women and children now confined indoors due to the lockdown — were mostly asleep when the worst economic catastrophe hit them last Friday midnight, threatening to change their lifestyles forever.

Without the glare of publicity, fuel prices were increased to unprecedented levels. Octane 92 petrol by Rs 20 a litre (Rs 75.70 a gallon), Petrol Octane 95 by Rs 23 (Rs 87.06 a gallon), Auto Diesel a litre by Rs 7 (Rs 26.50 a gallon), Super Diesel by Rs 12 (Rs 45.42 a gallon) and Kerosene by Rs 7 (Rs 25.49 a gallon). The conversion is based on 3.7 litres a gallon.  This is the first time there has been such a steep increase, that too from a government which vowed to bring down living costs and enhance employment opportunities through a clean administration.

The midnight increase was akin to the Sinhala adage of a man falling from a tree being gored by a raging bull. It is a millstone around the neck of Sri Lankans already reeling under food prices.  Rice and vegetables prices have almost doubled triggering an increase in other goods and services. However, the real impact of the fuel price hike, on top of already increased living costs, is yet to be felt due to the current lockdown. “Otherwise, people would have taken to the streets,” warned State Minister Nimal Lanza. His warning, a government source said, was supplemented by intelligence projections of countrywide anger and displeasure. Police have suppressed smaller protests in different parts of the country. This on the grounds that they violated quarantine regulations. Such protests covered not only the fuel price hike but also the ban on the import of chemical fertiliser, with farmers warning of an acute shortage in the coming weeks.

Accounts of the serious impact the fuel price increase appear elsewhere in this newspaper. However, some vital areas that require close public attention need scrutiny. One is the critical question of why the hike was not approved by the Cabinet of Ministers. This is a very dangerous precedent since any decision affecting the country and the people could be taken that way. Is it due to fears that the move would have been defeated outright placing the Government in a worst dilemma? President Gotabaya Rajapaksa was absent at the weekly Cabinet meeting last Monday. It was chaired by Prime Minister Mahinda Rajapaksa. The Sunday Times learnt from authoritative sources that there was no Cabinet Memoranda forwarded by any Minister for a fuel price increase; nor was the subject discussed. At least four ministers not only confirmed this but also added they and their colleagues could not present their opposing views because of this. “I don’t know what to tell the people of my electorate or even go there,” lamented one of them.

In the event of a decision by the Cabinet of Ministers, it is formally conveyed by the Cabinet Secretary to the relevant authority, in this case the Ceylon Petroleum Corporation (CPC). It was Energy Ministry Secretary K.D.R. Olga, who wrote a June 11 dated letter titled ‘Revision of Fuel Prices’ to the CPC Chairman.

Confirming the non-approval was official Cabinet spokesperson and Media Minister Keheliya Rambukwella. He told a news briefing that followed Monday’s ministerial meeting: “We did not discuss the fuel price increase at the Cabinet meeting.”

This notwithstanding, Energy Minister Udaya Gammanpila, insisted that the ministers had approved it at the cabinet meeting. He appeared to be the only one taking that line which is factually incorrect. He said the hike was recommended by the Cabinet Sub Committee on the Cost of Living. If the remarks about Cabinet approval were misleading, or even misguiding the people, Gammanpila was truthful enough to lay bare the reasons. They were shocking, though only a handful were privy to this before. He told a news conference last Tuesday:

“The main reason for the increase is that the Central Bank, Government’s economic advisor, sent an advisory note to the Government on May 31. That warned that unless fuel prices were not increased immediately, the banking sector could collapse. This would result in the collapse of the entire economy. The Central Bank also warned that our foreign reserves were extremely low and could run out. Whilst the cost of living could soar to unbearable levels as the dollar, which is already at Rs 200 (note: the unofficial price of a US dollar yesterday was Rs 205), would climb far higher, resulting in the price of every imported item skyrocketing.

“The Committee on Cost of Living discussed the warning and took this decision. The Committee officials include Presidential Secretary Dr P.B. Jayasundara, Prime Minister’s Secretary Gamini Senarath and Treasury Secretary S.R. Attygalle. Politicians in the Committee were Ministers Bandula Gunawardena, Namal Rajapaksa, Mahindananda Aluthgamage, Dullas Allahapperuma and State Minister Ajith Nivard Cabraal. They all discussed the matter in detail using their subject, knowledge and experience. In the end, they decided that the impact on the public would be far greater if the dollar was allowed to rise further and the banking system collapsed leading to rise in inflation. Therefore, they took a decision to increase fuel prices by 6% as the impact from that would be comparatively lower than the alternative.” This raises the question whether a Cabinet Sub Committee enjoys the same power as that of a Cabinet of Ministers? In the past, all matters examined by a Sub Committee has been later endorsed by the Cabinet of Ministers.

There are two key realities that emanate from Minister Gammanpila’s remarks. He is confirming officially that the foreign reserves are so low. That naturally raises fears. Until now, such a fear has been openly expressed by international banking circles and rating agencies. Similarly, he is also confirming that the Government’s cash flow is equally worse. That again raises the fear of being bankrupt domestically. The Government needs more rupees for essential imports including petroleum as the US dollar continued to appreciate. The government has not been able to halt it. It is to raise revenue locally that Prime Minister Mahinda Rajapaksa, (also Minister of Finance), chose to recommend online sale of liquor.  When lockdowns were called off temporarily to allow the people to buy food, it was the liquor outlets that had the highest crowds. However, the National Operations Centre for Prevention of Covid-19 Outbreak, which is led by the military, put a halt to it. Treasury Secretary S. R. Attygalle was this week busy putting together funds for fuel imports which stood at nearly US$ 27 million. Presidential Secretary P.B, Jayasundera approached the two state owned banks – the Bank of Ceylon and the People’s Bank – for a financial arrangement linked to bonds but has not been successful so far. These are being described as “emergency measures” and suggestions have also been made to lift the current lockdown permanently to allow economic activity and generate more funds. This is notwithstanding the present uncontrollable situation being not too conducive to such a move. Is the projection of contested figures intended to create a feeling that the COVID-19 pandemic is going down?

Another aspect is why the fuel price hike was rushed through when a nation was asleep? Minister Namal Rajapaksa who was in Jaffna a few days ago for the inauguration of the Government’s vaccination programme declared, “We have enough money.” A chorus of his ministerial colleagues, Johnston Fernando, Rohitha Abeygunawardena, Udaya Gammanpila and Keheliya Rambukwella among them joined in to assert money was not the problem when they addressed different events. The truth, however, is different. Not only has the country’s foreign reserves taken a dip, but locally it needs more money for imports. In essence, the Government has neither enough foreign reserves nor local currency. It is steps away from bankruptcy.

In a ten-paragraph statement (in two pages) on the fuel hike, President Gotabaya Rajapaksa made no reference to the worrying reasons given by Minister Gammanpila. He spoke about “transitioning to the use of ecofriendly energy sources” and added that 60% of the fuel consumption by the public and private transport services should be reduced.” That would naturally mean a curb in public transport schedules in time to come. He said, “The Government also aims to improve the renewable energy capacity to reduce 30% of fuel usage by the Ceylon Electricity Board for power generation. As is clear, President Rajapaksa’s statement refers to long-term solutions. He said he wanted to give every household, school, hospital, and government building solar thermal power kits. Here again, such panels would have to be imported and there are no funds for the purpose.

He declared that “the expenditure from the foreign exchange earnings for petroleum imports would be around US$ 4000 million, which is a third of the foreign exchange earned from exports. He added that price increases are “only one key factor in a common strategy that strengthens the local economy. It is a decision taken to safeguard the health and welfare of the people and to transform the import dependent consumer economy to an investment and consumer economy dependent domestic production.” The statement made no reference to a decision by the Cabinet. The alternatives set out by President Rajapaksa to lower the use of fossilised energy require either a vast volume of foreign aid or the much-needed foreign exchange. Sri Lanka’s foreign relations strategy has shut the door for aid from many developed countries except perhaps China. This again will not be sufficient.

Explanations on why the fuel prices went up are one thing. The highly potent question that arises is how and why the country’s finances were so managed that Sri Lanka is facing such bankruptcy? One fact that the people may not know is whether it was the result of poor management of the economy and finances. Was it bad advice, a politically engineered spending spree or simply a case of square pegs in round holes unable to do their jobs? More often, such advisors are considered “fully trustworthy” even if they are responsible for colossal blunders. The result – they make their leaders and the government more unpopular due to their inefficiency.  There are many such persons in key positions.

Crisis within ruling SLPP-led alliance

Despite the blessings of President Gotabaya Rajapaksa and Premier Mahinda Rajapaksa for the fuel price increase, there is yet a sharp division within the Sri Lanka Podujana Peramuna (SLPP). The lines are bound to get defined when the government parliamentary group meets. The first salvo, though not tactful enough, came from lawyer Sagara Kariyawasam, General Secretary of the SLPP. Several calls and messages to him went unanswered. He is a nominee of Basil Rajapaksa. He declared in a statement that Minister Gammanpila, who was responsible for the fuel price hike, should resign. Kariyawasam has said he made the statement only after several SLPP parliamentarians complained to him. Thereafter, he planned a news conference together with Minister Gamini Lokuge. It was cancelled at the eleventh hour. However, on Thursday Kariyawasam accompanied Premier Rajapaksa to the anniversary meeting of a Ceylon Petroleum Corporation trade union affiliated to the SLPP. Despite pressure, his position is well secure with most members backing him. Some senior SLPP members are piqued that the SLPP Chairman, Professor G.L. Peiris, has continued to be stoically silent when this crisis was growing within the party.

Minister Gammanpila was also loquacious at his news conference. Pointing out that we are” facing a threat much more dangerous than Tiger guerrillas,” he said, “We need to use fuel sparingly to conserve dwindling foreign reserves.” Those remarks come barely two weeks after the Government held what it claimed was a 65-nation seminar to promote investment in Sri Lanka. Can the same advice be given to would-be investors? They may have to pay for enhanced electricity costs to work their machinery, besides fuel for transport. Minister Gammanpila said he was “unaware he had to consult General Secretary Kariyawasam before effecting a fuel price hike. Otherwise, I would have asked him.” When asked whether Basil Rajapaksa, head of the Presidential Task Force for Economic Recovery, was “pushing him against a wall,” the Energy Minister replied “no.” Basil Rajapaksa is currently in the United States and is due to return to Colombo on June 23.  He also said that President Rajapaksa, Premier Rajapaksa and Minister Namal Rajapaksa were present at the Cost-of-Living Committee meeting that decided to increase fuel prices.

A caucus backing Minister Gammanpila had made the fuel price hike an issue between him (the energy minister), his backers and those supporting Basil Rajapaksa emerged after fuel prices went up. They are made up of Ven. Athuruleiye Rathana Thera, Minister Wimal Weerawansa (National Freedom Front), Minister Vasudeva Nanayakkara, (Democratic Left Front), Tissa Vitharana (Lanka Sama Samaja Party), A.L.M. Athaulla, National Congress, G. Weerasinghe, (Sri Lanka Communist Party), Tiran Alles (United People’s Party) and Asanka Navaratne (Sri Lanka People’s Party).

They signed a joint statement the essence of which was to defend Minister Gammanpila. Whilst making that clear, the eight signatories also made clear that “low-income earners should be given relief. Here are highlights of the statement: “Due to the prevailing pandemic situation that has affected other countries of the world and our country, has caused people lose their sources of revenue or at least had reduced their income.

“The Government has also had disruptions to its sources of income. At a time when both the people and the government are facing a challenging fate any government would be forced to take “unpopular’’ decisions. Our conclusion is that the decision taken to increase fuel prices is also an unpopular decision. Therefore, we believe that the low-income earners should be given relief. We in future would provide a set of proposals to the President regarding the methods that could be used to provide relief to the affected people.

“There is great effort taken to divert the responsibility of taking the unpopular decision of increasing the fuel prices on to the Energy Minister; we reject that action. The reason is because the decision on increasing the fuel prices was taken at the Cabinet Sub-Committee meeting on Cost of Living which was presided over by the President with the participation of the Prime Minister. On a previous day the President’s Media division too had confirmed this.

“However even though that is the backdrop, Sri Lanka Podu Jana Permauna (SLPP) the General Secretary Sagara Kariyawasam has diverted responsibility of this unpopular decision to Minister Udaya Gammanpila and caused embarrassment to the Government in the eyes of the people. Apart from that, the SLPP General Secretary has challenged the decision of the President and the Prime Minister. We would like to point out that such a statement is immature and could lead to people losing trust in the Government. Therefore, we point out that it is the responsibility of the President and the Prime Minister to immediately defeat these sectarianist trends.”  The fact that the caucus has seized the fuel hike opportunity to hit back at Basil Rajapaksa through Kariyawasam is clear. Those strongly backing him say they are awaiting his return to discuss the matter.

This shadow boxing is far too transparent. Not so long ago, ministers in the caucus voted in favour of ceding to China the East Container Terminal of the Colombo Port. This was when it came up for discussion before the Cabinet of Ministers. However, when asked why they changed their stance of supporting India, the explanation was that it was only the position of their own parties. “This is the reason why they sidestepped the party position at the Cabinet. When others, ministers, and MPs, were now raising issue, they are ganging up. Their target is not Kariyawasam but Basil,” charged a key minister who did not wish to be identified. He claimed it is the same group that did not wish to see Basil in Parliament or in the Cabinet after the 20A was passed.

EU threat

It is no secret that the fuel price hike’s main impact will be felt by every Sri Lankan family. Besides transport costs and a further rise in the prices of essential food items, goods and services, another looming threat is from the European Union. It has threatened to withdraw the GSP Plus tariffs in accordance with a resolution adopted by the European Parliament. There was an error in this report last week that the EU Parliament is in Luxembourg. It is located in Strasbourg. The EU is Sri Lana’s second largest export market, mainly for apparel and fish. The GSP Plus withdrawal would mean the closure of apparel factories making thousands of workers unemployed.

This is the snowballing effect from the debacle at the Geneva-based UN Human Rights Council sessions where a strongly worded resolution was adopted against Sri Lanka. The EU Parliament last week adopted by a two thirds majority a resolution which embodied most of the elements in the UNHRC resolution. A similar resolution is now pending before the United States Congress.

Speaking in the European Parliament, the European Union’s High Representative, Vice President Joseph Borrel, expressed regret at Sri Lanka’s withdrawal from the UNHRC resolution 30/1 “without any domestic measures to confirm that the government is taking reconciliation seriously, and its refusal to co-sponsor the new resolution, 46/1, adopted by the Council in March”. He said: “The European Union enjoys and values the broad and multifaceted relationship it has developed with Sri Lanka over the past decades. The European Union’s approach towards the country has always been underpinned by full respect for values and international standards, stressing the importance of upholding human rights, inclusion, and reconciliation.

“The Parliament’s resolution points to a number of worrying developments, and the EU has clearly noted in the Human Rights Council in March that the reports by notably the United Nations High Commissioner for Human Rights indicated trends towards a deteriorating human rights situation, including those of the LGBTIQ community.

“The Parliament rightly emphasises that security forces continue to apply the Prevention of Terrorism Act (PTA), which deprives detainees of due process rights, authorizes executive sanctioned detention without charge, and has facilitated the use of torture. Amending the PTA to bring it in line with international standards was a key commitment of Sri Lanka in the run-up to its readmission to the Generalised Scheme of Preferences (GSP +) in 2017.

“The law is not in line with the conventions that Sri Lanka has to implement under the GSP+. We have raised the issue with the new authorities, and they confirmed their intent on revisiting the provisions of the PTA with a view to making the appropriate amendments. So far, however, there has been no progress, and we have seen that on 9 March, the scope of the Act was broadened to allow for two years of detention without trial for those suspected of causing religious, racial, or communal disharmony. The issue will remain at the heart of our engagement with Sri Lanka in the framework of the GSP+ monitoring.”  Borrel’s statement demonstrated the Council’s support for the resolution as it echoed similar concerns. He has made clear that the GSP plus is at stake.

In response to the EU parliament’s adoption of the resolution, the Ministry of Foreign Affairs appears to have taken a more conciliatory approach indicative of inputs from the professionals there. A two-page statement on Monday said, “The Government is in the process of revisiting the provisions of the Prevention of Terrorism Act, in keeping with its commitments, as has been communicated to the EU.” It said, “Towards this endeavour, the government is studying legislation, existing legislation to propose necessary amendments and will also draw on international best practices adopted by other jurisdictions.” However, the statement rejects the claim that “the PTA has been systematically used for arbitrary arrests and the detention of Muslim or other minority groups in Sri Lanka.”

Alas, as is often the case, the Foreign Ministry statement has raised serious doubts in the European Union. This is because of a contradictory remark made by official government spokesperson and Media Minister, Keheliya Rambukawella. He told a news briefing that follows the weekly ministerial meeting: “The GSP relates mainly to the garment industry. It is my view that if it is related to the subject matter, such as child labour or a specific issue I can understand. If it is something related to EU requirements we can understand. I honestly don’t see any justification in that for another organisation to bring rules asking us to change our Constitution. (Note: No such request for any changes in the Constitution has been made either by the EU or any other foreign entity.)

“The Constitution is the right of the citizens of Sri Lanka. If they say anything related to the subject, I will raise my hands and say yes.  But this is some manipulation by some interested quarters. I am sure the Foreign Ministry will take it up and I think it should be dealt with. If they turn around and tell us you have to change this clause of the Constitution, where is the sovereignty that lies with the Executive, Legislature and Judiciary. Those are checks and balances placed in the Constitution for us to answer the public of Sri Lanka.

“But here some organisation comes up somewhere and says something. At one time they said we should negotiate with the terrorists. That is one of the conditions laid down. I have the right to express my personal view. I am sure the Foreign Ministry will take it up. I am telling the representatives here, you come out with any conditions related to the subject matter. I wonder whether they consider Sri Lanka as a sovereign nation in the first place. If that is the case, can any organisation tell us to do away with the sovereignty and just to accept what they say and carry on with our business?  The basic law that governs the country is the Constitution. The Constitution has ample checks and balances and that is the way you have the main three pillars. When the Executive decides on something, it comes to Parliament, then people go to courts. That is the cycle that works regarding the democratic process, the Sovereignty and the Constitution. I am convinced they are infringing into somebody else’s sovereignty.”

There is no doubt that Minister Rambukwella is entitled, without question, to his personal views. However, the question is whether he should express them during an official news conference where he is speaking for the Cabinet of Ministers albeit the Government of Sri Lanka? A European Union diplomat, speaking on grounds of anonymity, asked: “We are not sure whose version to go by, the Foreign Ministry or the Cabinet. There is more than one government view on any official position in your country. It does more harm than good.”

There was also another viewpoint. There were reports that Foreign Minister Dinesh Gunawardena wants to invite a delegation from the European Union to visit Sri Lanka and see for themselves what the Government has done. That too without the knowledge of relevant officials both in Colombo and in Brussels. It is well and good but should have been done before. However, such a visit will in no way undo the resolution which has already been adopted by the European Parliament. Nor will it lead to the EU backtracking on the GSP Plus tariff to Sri Lanka. Taking up contradictory positions seems to be one of the biggest enemies of the Government.

An example of such silence was over a meeting President Gotabaya Rajapaksa had planned for Wednesday with the Tamil National Alliance (TNA). On June 8, they were invited. Without any explanation, the meeting was called off. So, the TNA went ahead with the next meeting it had arranged with Indian High Commissioner, Gopal Baglay and his deputy, Vinod Jacob. The planned meeting with President Rajapaksa had, coupled together with a review of the PTA, fuelled speculation that the Government was re-thinking its approach with only a little over two months to go for the UN Human Rights Council sessions in Geneva. The silence is not announcing the reasons for the cancellation of the TNA meeting has cast doubts over such thinking. The message that emanates from it is not in the Government’s favour.

The Government is nose deep with problematic issues, both domestically and internationally. This requires a strong lifeline to extricate itself from the quagmire. As a starting point, it will depend on the ruling alliance leader’s ability to take on criticism constructively and not depend on henchmen. What is needed equally is transparency which has evaporated in many an area, particularly in the fight against the COVID-19 pandemic. Otherwise, it is only those who disseminate the “news” who believe in them and not the people.


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