Gin-Nilwala diversion project: Rs. 4.1 billion paid to Chinese firm but no work

Payments amounting to more than Rs. 4.1 billion have been made to a Chinese contractor for the Gin-Nilwala Diversion Project, but no work has been carried out, Finance Minister Ravi Karunanayake has told ministerial colleagues.

In a note explaining the current situation over the project, he has said that a Committee of three senior officials had conveyed the copy of a report to the Department of National Budget in July last year. In terms of that, payments were made on December 30, 2014 Rs. 998,576,311, on January 6, 2015 Rs. 2,000,342,335 and January 7, 2015 Rs. 1,003,136,336. This had totalled Rs. 4,011,054,982.

How such a huge amount was paid to the contractor and those responsible in the Ministry of Irrigation and Water Resources Management have become the subject of an investigation by the Financial Crimes Investigation Division (FCID). They are now recording statements from the officials concerned.

Noting that the present Irrigation and Water Resources Management Minister had forwarded a Cabinet Memorandum in July last year on the project, Mr. Karunanayake has noted that there is no reference in that to another memorandum dated February 16 last year.

In that, the Minister had sought approval to resume the project and urged the Finance Ministry to expedite negotiations to obtain credit facilities from the Exim Bank of China.

Mr. Karunanayake has added that the “…Cabinet of Ministers was informed that even though a commercial contract has been signed with China Camce Company Limited, it had not become effective as finalisation of the loan agreement with the Exim Bank of China, which is one of the main conditions for Engineering, Procurement and Construction (EPC) contract, has not been fulfilled.”

Now, Finance Minister Karunanayake has sought ministerial approval to appoint a “Special Committee” comprising senior administration, finance, engineering and con- tract law officials to study the developments. They are to ascertain whether the contract agreement where payment has been made could be implemented without any additional cost to the Government. The Committee will also study the “negative impact and costs” if one party wanted to terminate the agreement unilaterally.

In keeping with the FCID investigations, Minister Karunanayake also wants the Committee to ascertain whether “those officials involved have violated any financial regulations, government procedures and circular instructions.”

He also wants to determine whether the advance payment could be recovered without any adverse implications.

An official source said yesterday that the FCID probe came at the instance of a senior police official dealing with personal security. “Though funds were paid, no action has been taken to pursue the matter further. Thus, the chances of anyone benefitting from the advance payments was highly unlikely,” the source pointed out.