COPE wants AG to submit report on controversial gas deal

By Saman Indrajith

Committee on Public Enterprises (COPE) has recommended that Auditor General’s Department conduct an investigation into the cancellation of the Term Tender, approved by the Cabinet to buy gas from Siam Gas at USD 96 per metric ton and the purchase of 100,000 metric tons of gas at a cost of USD 129 per metric ton from an Oman company.

COPE chaired by Prof Charitha Herath made this observation when Litro Gas Lanka Ltd., Litro Gas Terminal Lanka (Private) Ltd., and Sri Lanka Insurance Corporation were summoned before COPE as part of an inquiry to ascertain if the orders given by the previous COPE had been implemented and to discuss their current performance.

It was discovered that tenders had been invited to purchase 2,80,000 metric tons of gas and three gas suppliers had submitted bids. Siam gas Company had offered the lowest price (USD 96) per metric ton, and accordingly the Cabinet had approved to award the tender to that company.

The Litro officials said that gas could not be obtained from Siam gas Company due to the economic crisis as banks in Sri Lanka were unable to submit the Standby Letter of Credit (SBLC) to Litro as per the conditions stipulated during the bidding process.

They further said that during the discussions with the company, Siam had expressed its unwillingness to supply gas without a Standby Letter of Credit (SBLC).

Due to that delay, as a temporary solution, Siam gas Company had suggested that it could provide 15,000 metric tons of gas as an emergency purchase. This is the gross amount of gas required for two weeks. However, the company then said it could supply only 6600 metric tons.

Litro officials also said that the Oman company, which had sent prices at USD 129 per metric ton for the Term Tender, had agreed to provide 100,000 metric tons of gas for four months at 25,000 metric tons per month.

Accordingly, after informing the Cabinet of the situation, the term tender given to Siam gas Company had been cancelled and Cabinet and approval granted for the term tender to purchase 100,000 metric tons of gas from the Omani company.

A USD 70 million loan from the World Bank and 20 million of Litro Gas Lanka Ltd., amounting to USD 90 million in total had been used for this procurement, Muditha Peiris, Chairman of Litro Lanka said.

The COPE chairman instructed the Auditor General’s Department to conduct an investigation and report whether the loan amount of USD 70 million from the World Bank had been properly utilised.

Prof. Herath added that buying gas from the Omani company at a higher price instead of the lowest bidder, Siam, could set a bad precedent.

The committee also inquired why Litro had not been able to purchase gas with USD 160 million allocated for the purchase of gas under the Indian Credit Line.The Litro chairman said that according to the conditions of the Indian government, Litro had to buy gas from the Indian company.

Litro officials said several rounds of discussions had been held on the matter. The COPE Chairman recommended to the Secretary to the Ministry of Finance to look into the issue immediately and submit a report within two weeks.

The attention of the COPE was also drawn to the fact that there were only four directors at Litro. It was revealed that according to the law, there should be five members. Since the Ministry of Finance appoints the members of the Board of Directors, COPE pointed out the need to appoint the Board of Directors as per law. The COPE Chairman recommended the Secretary to the Ministry of Finance to take necessary measures on this.

The COPE discussed the suitability of the same person holding the positions of Chairman and Chief Executive Officer of the company.The COPE also inquired whether Litro could obtain financial support from Sri Lanka Insurance Corporation, the parent company. Chairman of the Sri Lanka Insurance Corporation, Vijitha Herath said that the company had been able to purchase gas in the past due to the deposit of nearly five billion rupees in a state bank.

Representing the Secretary of the Ministry of Finance, Saman Fernando. Deputy Secretary to the Treasury, Chairman of the Sri Lanka Insurance Corporation and former Litro Chairman Vijitha Herath, Litro Chairman Muditha Peiris were present at this meeting whilst Thesara Jayawardane, former chairman of Litro Company, joined online.

Parliamentarians Patali Champika Ranawaka, Mahindananda Aluthgamage, Anura Dissanayaka, (Dr.) Harsha de Silva, (Dr.) Sarath Weerasekera, Jagath Pushpakumara, Indika Anuruddha, S.M Marikkar, Jayantha Samaraweera, (Dr.) Nalaka Godahewa, Premnath C. Dolawatta and Madhura Withanage were present at the meeting.