Battle here and abroad

Chairman), Lakshman Gunawardena, Methsiri Wijegunawardena and Champika Amarasekara.

Tilak Collure, who served as Administrative Officer has been appointed as the new acting chairman. Other members of the new board are Susantha Silva, Hans Wijesuriya and Nalin Pattikirikorala.

Minister Premajayantha told the Sunday Times the provisions of the Ceylon Petroleum Corporation (CPC) Act under which the appointment of a chairman and a board of directors are made are explained in the letters issued to them. The idea, he said, was to remind them of their duties and functions as required by law. They have to play their role to prevent any form of malpractice or irregularities. "I have asked my Ministry Secretary to write to the Auditor General to carry out a full audit of the financial activity of the CPC from the beginning of this year. I want to ask the chairman of the Committee on Public Enterprises (COPE) to summon those who will be found responsible for misdemeanours before the Committee and questioned," he said.

He added that the audits for 2010 and 2011 had already been carried out by the Auditor General. When pointed out that the AG would only go into the financial aspects and not adulteration, if there was any, Premajayantha said, "that aspect has been gone into by the three-member committee I appointed. I will take action on that when I receive the report on Monday."

Last month, on a recommendation by Minister Premajayantha, the Cabinet decided that his Ministry should "make all endeavours to enter into term contracts for the supply of petroleum products, preferably with extended credit facilities, in lieu of the present practice of spot buying on a weekly basis." Asked to comment on this decision, Premajayantha said this would ensure "a transparent system of procurements". Tenders will be called through advertisements in the national media and the best offer particularly by those who refine petroleum products in foreign countries would be considered. In the case of "spot buying," the Petroleum Industries Minister said even third parties who trade in petroleum products win contracts though they have no refining facilities.

However, the Sunday Times learnt that the cabinet of ministers last month endorsed a recommendation by the Special Standing Cabinet Appointed Procurement Committee on purchases of petroleum products from June 1 to June 30 this year. Covering cabinet approval was granted following recommendations of the Committee as well as the Technical Evaluation Committee (TEC) for purchases during the period mentioned. It is not immediately clear whether the contaminated stocks of diesel were also procured during this period and thus won cabinet approval. If indeed that was the case, it does not take a rocket scientist to say that someone in the CPC's fuel purchasing process misled the ministers too or misled themselves.

Another issue which has hurt practically every Sri Lankan is the cost of electricity, one of the highest in the world. The UNP has been oblivious to this factor and has failed to highlight the hardships caused by the steep increases in tariffs and now power cuts -- a phenomenon which has come to haunt electricity consumers despite assurances to the contrary by Power and Energy Minister Patali Champika Ranawaka. He had announced a staggering electricity surcharge of anything between 15 and 40 per cent in February this year and declared that it would curtail the losses of the Ceylon Electricity Board (CEB). However, not many Sri Lankans know that the CEB is facing an acute crisis

The Sunday Times is able to reveal exclusively today that the CEB is confronted with a "severe financial crisis". Minister Ranawaka has told his ministerial colleagues last week that there were four reasons for this situation. They are: (i) Increase of cost of independent power producers (IPP) and CEB fuel due to increase of fuel prices by CPC and increase of thermal generation due to prevailing drought situation in the country. Additional revenue on Fuel Adjustment Charge (FAC) is not sufficient to cover the increased fuel cost. (iii) Non-receipt of subsidy from the Government

for 2011 (iv) Use of CEB funds for capital works for which

Government funds were not received. In the light of this situation, Minister Ranawaka, with the concurrence of the Ministry of Finance, has sought to increase the borrowing limit of the CEB to Rs. 74.2 billion. The breakdown is as follows: Overdraft and term loans Rs. 45 billion, Provision for LCC (Letters of Credit) Rs. 10 million and new Guarantees for Independent Power Producers Rs. 19.2 million.

Minister Ranawaka has said outstanding payment for independent power producers and CPC had reached Rs. 16 billion and Rs. 15 billion respectively as at June 12.

This is how he describes the present situation: "As the expected monsoon rainfall has not materialised, generation of hydropower is very limited. Under these circumstances, the CEB is compelled to use additional thermal power generation to provide uninterrupted power supply to the nation.

"As payables to independent power producers have reached peak level, purchasing of fuel from CPC for thermal generation has been limited. IPPs have utilized their credit limit to maximum level. The CEB has obtained short term loan facility of Rs. 20,000 million during past few months to settle these liabilities to CPC, IPP and for coal importation. Accordingly total owed to the People's Bank is as follows:

"Overdraft Rs. 800 million, Term Loans Rs. 5,410 million, Short Term Loan Facility (Bill Discounting) Rs 20,454 million; totals Rs 26,664 million. Letter of Credit/Guarantee of Rs 10,000 million has been fully utilised. Only a standby LC facility of Rs 18,000 million has not been utilised."

Ranawaka has said as a temporary measure, the CEB explored the possibility of obtaining a term loan facility from the People's Bank to settle a part of the dues to the CPC and IPPs. However, the People's Bank has turned down such a request. It was on the grounds that the Central Bank had, through a Monetary Board decision, disapproved

(ii) increasing the limit placed on any single borrower. Hence Minister Ranawaka wants his ministerial colleagues to approve his request to ask the Governor of the Central Bank to increase the single borrower limit to the CEB to Rs 74.2 billion.

The picture painted by Ranawaka to his ministerial colleagues, contrary to what he tells the public, is a very gloomy one for all consumers of electricity in Sri Lanka.

It is in the backdrop of a "severe financial crisis" that trade unions in the CEB are demanding a substantial pay hike. The government has stalled them so far. However, if the unions succeed in staging a strike and causing disruption, there would be no alternative but to heed their demands, even partially, pushing the CEB into a financial catastrophe. At the end of it all, for the consumers it only means that they face the threat of more increases in power tariffs when the CEB begins to feel the crunch. Successive ministers in charge of the power portfolio have done just that. Minister Ranawaka, who declared that power cuts would be a thing of the past just weeks before the load shedding began, will be left with no choice but to force the consumer to pay more. This is when what he calls the "severe financial crisis" in the CEB cannot be resolved with bank support any more.

Another matter of significance this week is the likelihood of South Africa becoming an intermediary to assist in the government's reconciliation efforts. In Colombo this week is the country's Deputy Foreign Minister, Ebrahim Ebrahim who played a role in the peace process in the early 1980s. He is accompanied by Roelof Meyer. He was chief negotiator for the National Party (NP) government in South Africa. He was closely involved in the talks for the settlement of the South African conflict. It is in this capacity that he negotiated the end of apartheid together with Cyril Ramaphosa, who was chief negotiator for the African National Congress (ANC). These negotiations resulted in the first democratic elections in South Africa at the end of April 1994. After the elections Meyer continued in the portfolio of Constitutional Affairs in the cabinet of former President Nelson Mandela.

Together with the South African Ambassador Geoff Doidge, the delegation met President Rajapaksa, Defence Secretary Gotabaya Rajapaksa, Opposition Leader Wickremesinghe and Tamil National Alliance (TNA) leader Rajavarothayam Sampanthan. According to External Affairs Ministry sources, the visit of the South African team for what they described as "testing the waters" was the result of initiatives by Minister G.L. Peiris.

A South African involvement in the reconciliation process, no doubt, would give the government credibility both domestically and overseas, at least to deliver a message that it is serious about reconciliation. However, whether South Africa could persuade the TNA to come back to the negotiating table will remain a billion dollar question. On the other hand, the South African initiative comes at a time when India has so far failed to persuade the government to heed Sri Lanka's assurance that the 13th Amendment would be fully enforced. President Rajapaksa has declared that any political package to address Tamil grievances should be determined by the proposed Parliamentary Select Committee (PSC).

On Wednesday, Sri Lanka's Ambassador to the UN in Geneva handed over to the Secretariat of the UN Human Rights Council Sri Lanka's report on human rights issues. The final draft was formulated by Presidential Secretary Lalith Weeratunga with Minister Mahinda Samarasinghe, President's Special Envoy on human rights issues. It was later handed over to the Ministry of External Affairs for onward transmission to Geneva. The.report deals with pledges made by Sri Lanka at the last Universal Periodic Review (UPR) in 2008, voluntary measures adopted by the government and the Action Plan for the implementation of recommendations made by the Lessons Learnt and Reconciliation Commission (LLRC). Sri Lanka's case under the UPR will come up on November 1.

This week's developments show that the government has acknowledged the need to get its act together on issues concerning foreign relations whilst demonstrating through the upcoming polls that it has public support.

As exclusively revealed in the Sunday Times front page lead story last week, the government has decided to allow UN experts to visit Sri Lanka to advice on implementing the US-backed resolution adopted by the Human Rights Council in Geneva in March. A visit by United Nations Human Rights High Commissioner Navi Pillay is also expected before the end of the year.

Meanwhile, Ms. Pillay's term of office has become the subject of some attention at the UN in New York. Maththew Lee, of the Inner City Press, who was recently expelled from the UN Foreign Correspondents Club had this to say: "After Navi Pillay accepted or was forced to accept a two year than four year second term as UN High Commission for Human Rights, Inner City Press asked her directly and on camera if this made her less independent, less able to speak out. She declined to answer. Now Inner City Press has exclusively learned from wellplaced sources how the two year compromise was reached.

"Secretary General Ban Ki-moon, at the direction of the United States and others, told Pillay that she could not have a second term, that to make it look better she herself should resign. Pillay refused, and threatened to go public. Other states, most prominently Pillay's native South Africa, were enlisted to try to find a solution. In a cynical new low, South Africa was offered the Under Secretary General of Management position ultimately given to Japan's Yukio Takasu if only South Africa would convince Pillay to leave. But South Africa refused.

"And so, the two-year compromise was reached, putting Pillay in a weakened position. Her team and reportedly herself will now visit Sri Lanka. Despite 40,000 civilians killed and no accountability -- in fact, one of the generals responsible, even according to Ban's own Panel of Experts report, is still listed as an adviser to Ban Ki-moon -- we'll see what Pillay says, or can say."

Thus, the government appears to have launched a two pronged battle, one overseas and the other domestic, to give itself a new image. Yet, more challenges are ahead as financial crises hit key consumer oriented state organisations.