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Crooked Deals

Jun 12, 2010 3:12:13 PM - thesundayleader.lk

By Paneetha Ameresekere Business Editor

C.E.B. Chairman Vidya Amarapala is quoted to have had said in the main story on this page in our last week’s edition that the C.E.B. is heading for a Rs. 34 billion loss unless radical steps are taken.
He identified one of those as re-negotiating the power purchase agreements (p.p.a.) with private power producers (p.p.p.).
Renegotiating such p.p.a obviously infer that the C.E.B. feels that the present p.p.a. are unfair and hence need to be renegotiated, naturally raising the question with regard to the bona fides of the p.p.a. already entered into.
A three member committee headed by former Additional Solicitor General and C.E.B. Vice Chairman Douglas Premaratne (P.C.) and comprising lawyers Gomin Dayasiri and Prashanthala de Alwis will be involved in the renegotiation of such contracts.
Therefore, in parallel with the re-negotiating the p.p.a. already made, an investigation needs also to be launched as to how such p.p.a. were finalized in the first place, thereby placing the C.E.B. in an unfair position vis-a-vis the p.p.p., by virtually executing such deals at a loss to the Board.
As such the culprits responsible for engineering the C.E.B. into such corrupt deals, if that may be the case, and regardless of whether they be big or small, need to be punished.
C.E.B. is a public institution upkept by public funds, robbing the C.E.B. means robbing the people of this country. Therefore if there is proof of corruption in any of these p.p.a., then, punitive action needs to be taken against such miscreants, regardless of their status.
This will not only strengthen the Government’s credibility in the eyes of the public, such actions will also attract investments from bona fides companies. That’s why it’s important for the country to have strong and independent institutions, with a mandate to ensure good governance in public affairs, in place.
According to Amarapala, those p.p.p. or independent power producers (i.p.p.) with whom C.E.B. has signed up p.p.a. comprise thermal power producers (mainly diesel) and mini hydro power and wind power producers as well.
Their average sales price of a unit of electricity sold to the C.E.B. is Rs. 20, said Amarapala. The law does not permit i.p.p. to sell their electricity, other than to the state owned C.E.B.
The C.E.B. in turn sells those electricity units to the retail consumer at an average price of some Rs. 13 a unit, thereby making a Rs. seven loss on each unit it sells to the domestic or retail consumer on the basis that such units of electricity are purchased at Rs. 20 a unit, with the Treasury compelled to subsidise the C.E.B. for such discounted prices and loss sales.
Monies in the Treasury are people’s money and if those monies are wasted due to unscrupulous deals by the C.E.B., it’s the public who are being cheated.
It’s also simply bad business to have subsidies carte blanche, where those who can also afford, enjoy such subsidies.
C.E.B. of course has other consumers, such as commercial, industrial and religious (temples, churches, etc.), where the latter tariff is even lower than the domestic tariff rate, but, by and large, the mass of the consumers, in sheer numbers, comprises the retail or domestic consumer.
Sri Lanka is said to have the highest electricity tariffs in the region; that naturally impinges on the island’s export competitiveness. One of the reasons given for Sri Lanka’s high electricity costs is due to the C.E.B./ Government opting for the more expensive diesel power generation plants, a metamorphosis that took place during President Ranasinghe Premadasa’s tenure of office and continued into President Chandrika Kumaratunga’s period as well.
This was because Sri Lanka’s hydro power generation capacity by then had had reached a zenith and with increasing power consumption, the need arose to go for thermal power plants with private sector participation to meet the ever growing demand for electricity in the island, so that supply would be able to meet the demand.
P.P.a. came into being, and physically begun being implemented during the Kumaratunga era, though having its birth during the latter part of the U.N.P. regime, with the advent of build, own and transfer (b.o.t.) and build, own and operate (b.o.o.) projects being introduced to the island because of the scarcity of funds for public investments, made worse by the drying up of donor assistance for such infrastructure development works.
But the diesel option was not the most cost effective option to follow, with cheaper options such as coal power largely being ignored due to “public” protests.
With electricity prices in the island being one the highest in the region, it’s virtually impossible to increase such further, a fact conceded by Amarapala.
To the credit of the present Government, it took the bold step of going in for a coal power plant (cheaper alternative to diesel) at Norochcholai, a project which even the Premadasa Government was scared to implement due to external pressure, though this project was there in the drawing boards even then.
Hats off to the Rajapaksa Government at least on this score, for having the boldness to go though with this project despite protests by certain sections of the public.Sri Lanka needs bold leaders, bold enough to take hard decisions for the good of the country in the long run, and not leaders whose only priority is to win the next elections. But that alone is not enough, it also needs leaders who will take punitive action against those who misuse and abuse public property for their own personal gain, otherwise a dangerous precedent is being created.