Jun 23, 2022

COPE reveals hidden debt at Hambantota port Featured

It was revealed at the Committee on Public Enterprises (COPE) meeting held yesterday (22) that the loans taken for the construction of the Hambantota Port had not been repaid with the money received from the lease in 2017 and that the money had been used for other purposes.

Accordingly, it was revealed that the Ports Authority had given the loan amount as well as the amount received during the lease of the port for 99 years in 2017 to the General Treasury and the loan taken for the construction of the port had not been paid and instead the Treasury had used these funds for other government expenditure as the loan interest rate was low.

Although the General Treasury has repaid the loan and the interest, it has not been properly recorded in the accounts as a loan repayment.

It was also revealed that the Ports Authority had withdrawn the financial statements the balance of Rs. 147,746 million loan and interest balance and Rs. 31,545 million of foreign exchange conversion loss as at November 30, 2017 without the approval of the Treasury or the Cabinet.

Accordingly, the amount of foreign loans obtained for the construction of the Hambantota Port has not been shown in any of the publications of the government.

These facts were revealed at a meeting of the COPE Committee chaired by Prof. Charitha Herath on Wednesday (22) to examine the 2019, 2020 Auditor General's Reports and Current Performance of the Sri Lanka Ports Authority.

The COPE Chairman recommended to the Secretary to the Ministry of Ports and Civil Aviation that the Ministry of Finance discuss this matter with the Ports Authority and take the necessary steps to include it in the accounts and report to the COPE Committee within a month.

It was also revealed that the Magampura Port Management Services (Pvt) Ltd., a subsidiary of the Authority which had ceased operations from November 2017 had obtained a loan of US $ 24 million from a local bank to purchase ship fuel in 2014 and the bank had filed a lawsuit against the company for failing to repay the loan.

It was also revealed that the purchased ship fuel worth US $ 24 million was stored for a long time without being used and was later sold for $ 3.5 million. Accordingly, a loss of around $ 20.5 million was incurred. 

It was further revealed that when the port was leased to a Chinese company in 2017, all the oil tanks of the 'Magampura Port Management Services Pvt. Ltd was also handed over, but the loan details were not disclosed. 

Therefore, the COPE Committee instructed the Ministry Secretary  to immediately take action  to initiate legal action against the former board of directors and advisors.

Meanwhile, it was revealed that although the number of employees approved by the Ports Authority did not exceed 9990, the recruitment process was informal and complex.

The recruitment procedure (SOR) submitted by the Ports Authority in 2010 has not been approved by the Department of Management Services and the recruitment procedure and salary scale have been decided through collective agreements between the institution and the employees, the Ports Authority officials said.

It was further revealed that the Ports Authority has not agreed to the recommendations of the Management Services Department and the Salaries Commission and has only approved the posts accordingly and the recruitment procedure (SOR) could not be approved as the relevant salary scales of the Authority are not approved. 

The COPE Chairman emphasized that as the Port Authority is a local institution, it must follow  proper processes within the legal framework applicable to other institutions, although the salary scale and the recruitment procedure are determined by collective agreements. The COPE Chairman recommended to the Secretary to the Ministry that if there are any specific reasons, they should be discussed and resolved expeditiously within the legal framework with the relevant agencies including the Department of Management Services and a proper decision should be taken immediately.

The massive overtime allowances paid to the employees of the Authority were also discussed at the COPE meeting. 

Special attention was paid to the Rs. 5850 million paid in total as overtime payments including the Rs.  1173 million paid for divisions with excess staff in the year 2021. It was revealed that over 1,500 unqualified persons have been recruited as work assistants and additional overtime allowances have been paid to them on par with those with professional ability.

It has also been revealed that there are employees who receive over 400 hours of overtime per month.

Expressing his displeasure over the situation, the COPE Chairman stressed that this should never happen again and that only qualified persons should be recruited.

The COPE members also emphasized that it was the responsibility of all politicians, regardless of party affiliation, to allow recruitment based on merit alone without any political interference.

Discussions were also held regarding the non-payment of dividends and surplus money to the Consolidated Fund under the Monetary Act and the Ceylon Ports Authority Act.

From 2016 to 2021, the Authority spent Rs. 69,686 million but the treasury has received only Rs. 600 million and some loan installments will be paid and a large sum of money will be spent on maintenance, the Chairman of the Ports Authority said.

He also appreciated the role of the Ports Authority as a for-profit institution and recommended that the Treasury should paid a profit of 8% as per the Ports Act.

There was also a discussion on the delay in starting work to purchase cranes for the operation of the Port East Container Terminal.

The Chairman of the Ports Authority said that the purchase is scheduled to be completed by 2024. The COPE Committee stressed the need to expedite the process and expand the operational use of the terminal for commercial purposes.

The Committee also emphasized the need for a strong performance of the Internal Audit Division. The COPE Chairman also recommended that the audit plan for the year 2022 be sent to the COPE Committee.