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The rot of SOEs and monopolies

The rot of SOEs and monopolies

21 Jun 2024

The Committee on Public Enterprises (COPE) yesterday charged that due to a deliberate delay spanning eight years, to issue a regulatory circular to petrol filling station owners, the Ceylon Petroleum Corporation (CPC) has incurred losses to the State exceeding Rs. 3.4 billion during the 2014-2022 period. The Parliamentary watchdog is planning to complain to the Criminal Investigation Division (CID) regarding those who are involved in the mammoth financial fraud.

The losses were revealed at a meeting of COPE in the Parliament last afternoon. It was disclosed that the public had to bear an additional cost for fuel due to the payment of Rs. 31,021.07 million as extra commission to the distributors. Due to the overpayment made by the officials, each customer has had to pay Rs. 5.85 for a litre of Octane 92 petrol, Rs. 7.50 for a litre of Octane 95 petrol, Rs. 5.88 for low-emission diesel and Rs. 6.96 for low-sulphur diesel in excess as of the calculations to date. One can only imagine the overall impact on GDP, state earnings and the economy due to such despicable action.

It is learnt that the commission, which was paid in excess for 2022, had been accounted as a sales expenditure when it should have been entered as a receivable. 

It was also disclosed that the officials responsible for the said fraud are no longer in the country. With the horses well out of the gate, the COPE has directed the CPC to submit a report within seven working days containing the list of names of those affiliated to committing the fraud and the measures that the CPC has taken to hold such officials accountable for their wrongdoings. The COPE also directed the CPC to submit a comprehensive report within two weeks containing the list of names of those affiliated to committing such financial fraud.

Despite such revelations, there remains a segment of the population who cling on the idea of State-owned Enterprises (SOEs) like the CPC, and State-controlled monopolies of critical services, including utilities as ‘national assets’ which they attempt to justify through a warped interpretation of them (SOEs) being a ‘national security interest’. 

Where is the outcry about the losses to the State, which is a loss for the public, it is a fraud not just against the State, it is also against the public, who through the sweat of their brow continue to have to hold up harsh tax structures to balance the ‘big government’ due to such corruption and malpractice. Those who often scream ‘national security interest’ often do not understand the concept and what it entails. In many of the prosperous, robust and stable democracies of the world, there are no state-controlled monopolies, but sound regulations, market pricing, and strategic reserves. Alas, few politicians and trade unionists in Sri Lanka can grasp that concept.

This is the latest revelation, in a long list of corruption within SOEs and the evidence about massive frauds and corruptions over the years continues to grow. Last year, The Sunday Morning revealed exclusively about a fraud within the Ceylon Petroleum Storage Terminals Ltd. (CPSTL) where for the period of 2022, the SOE had paid Rs. 1.8 billion in overtime payments for their staff. This, despite Government circular to all ministries and State institutions to cut their expenditure. The Sunday Morning reported that a number of employees of the Ceylon Petroleum Storage Terminals Ltd. (CPSTL) has been issued paychecks which included overtime pay equivalent or greater than their basic pay in 2022 and early 2023. CPSTL, which is part of the Ceylon Petroleum Corporation (CPC), owes the State billions of rupees in debt as of March last year, and still does. According to a senior official in the Government at the time, the CPSTL in 2022, while the economic crisis was in full swing, had allocated nearly Rs. 1.8 billion for overtime payment in its budget for 2022, Rs. 3.01 billion for the payment of basic salaries of its employees, and Rs. 500 million allocated to be awarded as bonus. How is this possible? Where was the administrative oversight and due diligence?  

 “The situation with Over Time (OT) pay is clearly being abused by many and the senior management is complacent. This abuse of benefits has been ongoing for decades,” a senior official at the Ministry of Power and Energy, who wished to remain unnamed, said.

Given the lengthy history of corruption and malpractice at SOEs such as the CPC, Ceylon Electricity Board (CEB), SriLankan Airlines and others, it is imperative that the Government carry out robust reforms to make them cost effective, less bloated with staff, and more efficient for the public. In doing so, there needs to be marked improvement in transparency, accountability and strict compliance with anti-corruption measures. The taxpayer has been taxed to ruin, while politicians and state officials make merry at our expense. This must stop.  

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