Massive irregularities at Lanka Coal Company (Pvt.) Ltd. have been uncovered by the Committee on Public Enterprises (COPE) recently.
The irregularities as pointed out in COPE’s first report, presented on 10 March by COPE Chairman Prof. Charitha Herath, included the irregularities that occurred during the process of calling and evaluating bids, procurement process, covering approvals from Cabinet, and appointments to the procurement evaluation committee.
Accordingly, COPE has revealed that Lanka Coal has issued applications to institutions that had experience of only three years during the coal procurement process despite the resolution, during the calling of bids, that the prospective institutions should have five years of experience in supplying coal.
The Committee pointed out that the closing dates for receiving bids pertaining to the procurements relevant to the report had been changed on several occasions and expressed the concern that the institution had not been able to gain the advantage that could have been achieved by allowing competition between the bidders during procurement.
The COPE report also noted that the available facts revealed that there had been situations where the procurement committee had taken actions to select another supplier after suspending the supplier selected in the previous procurement process and, as a result, the procurement had to be done again, causing a huge loss of financial capital to the country.
The Committee observed that the auditing had reported that the procurements that had not been signed by the technical evaluation committee had been approved, and they should be given the opportunity to mention any objections/observations in this regard.
The Committee has submitted a clarification regarding the commencement of spot tenders in 2015-2016, and the reasons for calling spot tenders and long-term tenders on previous occasions. It was informed that the procurement committee and technical evaluation committee would decide on the percentage to be taken from long-term and spot tenders, and inform COPE in this regard.
Though procurement has been done on the covering approval of the Cabinet, there are a large number of transactions to which the granting of approval has been delayed, COPE revealed.
The Committee observed that the audit has information that the procurements had not been done in accordance with the procurement guidelines during the period mentioned in the report. The Committee pointed out that the Ministry of Power, Lanka Coal Company Ltd., Ceylon Electricity Board, and the Shipping Corporation should have continuous discussions in this regard.
COPE also highlighted the prevalence of contradictions between the objectives stipulated in the Cabinet agreement to establish Lanka Coal Company (Pvt.) Ltd., and the objectives of the company when it was incorporated. Thus, the need has arisen to limit the objective of this company to the sole purpose of purchasing coal, and the Secretary to the Ministry stated that discussions have been started in this regard.
Responding to the matters pointed out by COPE, the Lanka Coal Chairman had stated that although permission to supply coal had only been given to institutions having at least five years’ experience before 2017, permission was also extended to institutions that had three years’ experience after 2017.
The Secretary to the Ministry of Power has, by his letter No. PE/FIN/8/21/2016 dated 23 October 2020, informed the Committee that an expert on procurement has been assigned to study the procurement process and documents, and make appropriate recommendations. The letter adds the report would be presented as soon as it was received, and the necessary actions mentioned in the report would be taken, with the Committee kept informed of such.
The Secretary to the Ministry stated to COPE that the weaknesses in the process of calling for bids have been identified, and arrangements are being made at present to regulate the process by studying the conditions related to procurement in other countries.
The Ministry Secretary is of the view that the coal procurement method should be based on the behavioural patterns of the market. The COPE Chairman stated that a separate allocation percentage should be assigned to spot tenders and long term tenders, while emphasising that whichever method is followed, the decision should be based on a policy outlook, rather than a profit-and-loss assessment.
Clarifying the spot tendering issues, the Ministry Secretary revealed that the spot procurement involves quick decision making, and therefore, those transactions are done on the covering approval; in long-term procurements, the relevant transactions are only conducted after obtaining Cabinet approval.
Accordingly, the Committee was informed through the letter dated 23 October 2020 and No. PE/FIN/8/21/2016 by the Secretary to the Ministry of Power that arrangements have been made to change the Article of Association of the Company, as mentioned in the Cabinet memorandum that was the base of the company’s establishment. Further clarifications have been submitted on the facts recommended by the letter dated 4 January 2021 and PE/FIN/8/21/2016 by the Secretary to the Ministry of Power.
Accordingly, a draft – amended as per the recommendations of the Auditor General, COPE, and the relevant Cabinet decision – which includes the objectives related to the subject area and removing unrelated aspects, had been submitted at the 78th board meeting held on 4 December 2020.
It was further informed that, to establish those new objectives, action will be taken to report the progress of further activities, since the final amendments have to be decided in a shareholders’ meeting.
Attempts made by The Sunday Morning to contact Power Minister Dullus Alahapperuma were futile.