Fisheries Corporation's game plan to reverse its rotten results
By Uwin Lugoda In an attempt at making the Ceylon Fisheries Corporation (CFC) a profit-making entity, Prime Minister and Minister of Finance Mahinda Rajapaksa proposed in the Budget 2021 to allocate Rs. 500 million for the organisation so as to enable a complete restructuring to make it beneficial for both the consumer and fisherman. [caption id="attachment_106901" align="alignleft" width="300"]
"The department has been running at a huge loss for the last 15-20 years, mainly due to mismanagement and corruption. There is a huge amount of money we have to pay foreign parties, including some for fish we bought in 2010 which is yet to be settled" CFC Chairman Maj. Gen. (Retd.) Lalith Daulagala [/caption]
First established in 1964, the CFC has long been ailed with issues of mismanagement that affect many other state-owned institutions and Sri Lanka’s public sector organisations, resulting in year-on-year losses leading to massive debt over the past 20-year period. While the corporation has aimed to become the “leading commercial organisation, guiding and promoting fish production and trade for the benefit of the consumer and the producer”, corruption and mismanagement of funds has led to it becoming a loss-making organisation from the year 2000, except for almost negligible profits in the years 2001-2002 and 2017-2018, according to CFC officials.
The state organisation, which plays a dominant role in the capture, marketing, and export of fish and fishery products in Sri Lanka, is currently around Rs. 900 million in debt, according to CFC Chairman Maj. Gen. (Retd.) Lalith Daulagala. Appointed to this position last January, Daulagala explained to The Sunday Morning Business that he is currently carrying a lot of baggage due to the mismanagement of funds and corruption by previous governments.
“The department has been running at a huge loss for the last 15-20 years, mainly due to mismanagement and corruption. There is a huge amount of money we have to pay foreign parties, including some for fish we bought in 2010 which is yet to be settled.”
He explained that between 2010 and 2012, the organisation proceeded to buy fish from foreign vessels at a price of Rs. 99 per kg – this excluded export-quality fish – which the organisation proceeded to sell for Rs. 380 per kg. However, these earnings that were supposed to be utilised to settle its debt to these foreign vessels were not utilised for that purpose, resulting in the organisation having to settle these debts now.
The organisation’s debts continued to pile up as the CFC incurred losses of Rs. 68.97 million, Rs. 41.76 million, Rs. 54.45 million, and Rs. 119 million in 2011, 2012, 2013, and 2014, respectively, according to the corporation’s 2014 annual report. The report went on to state that this was despite having a revenue of Rs. 1 billion in the years prior, thanks to the expansion of the retail fish stall network. As of 2017, the organisation had 96 CFC retail outlets, most of which were located in the Western Province of the country.
In January of 2019, the Fisheries Ministry decided to implement a programme to end the CFC’s daily loss-making and build the corporation into a productive state institution. Former Minister of Fisheries and Aquatic Resources Development P. Harrison and State Minister Dilip Wedaarachchi emphasised last year that since it was revealed that the Fisheries Corporation had incurred losses for the longest time in its history, everyone should be committed and dedicate themselves to making the state institution became an efficient service committed to public service and not a burden to the country any longer.
According to reports, at the time, when asked how many CFC outlets incurred losses, the CFC officials told Harrison and Wedaarachchi that out of 22 CPC-owned local purchasing and sales centres only eight were profitable, and all the others incurred losses. The officials stated overstaffing was the reason for the losses; the company had 244 employees at the head office alone at the time.
“Such a number of employees cannot be borne by the institution and paying the employees' salaries and allowances is a huge problem under the current financial crisis,” said the officials in a news report at the time.
However, current Chairman Daulagala stated that the problem lies in the corporation’s infrastructure and sales numbers. He explained that when he took over as Chairman, the CFC only had a monthly sale of 317 tonnes, which falls short of the profitability threshold of 500 tonnes per month.
He stated that they managed to bring their monthly sales up to 420 tonnes by September and were expecting to reach the 500 tonne mark by December. However, these plans were in place before the second outbreak of the Covid-19 pandemic; after which, the sales dropped to 200 tonnes in October.
The public began to avoid eating fish with this second wave, as the number of patients reported from the cluster of positive cases originating from the Peliyagoda Fish Market kept increasing. While the Government and health authorities assured the public that consuming fish would not pass on the virus to humans, fish sales still dropped, despite price reductions.
The CFC then came to the aid of these local fishermen by purchasing fish stocks worth Rs. 650 million from them. The corporation started buying the fish harvest from multi-day fish trawlers on the directive of Fisheries Minister Douglas Devananda.
Arrangements were made to distribute these fish stocks to all parts of the country enabling, the consumers to purchase fish at a fair rate under the close supervision of Daulagala.
He stated that while they are buying fish from the fishermen, they could not buy everyone’s harvest due to logistical problems such as storing the fish in private sector cold rooms, which can only store 10 tonnes of fish at a time.
“We were the ones who came to help these fishermen in their time of need, but we cannot buy from everyone. We are experiencing very low sales numbers now, and as a self-funded organisation, we depend on sales. On 23 November, two of our stores reported that they only sold 85 kg each during the day,” he told The Sunday Morning Business last week.
Daulagala stated that the latest budgetary allocation of Rs. 500 million would go towards the improvement of the corporation’s infrastructure, which is currently its highest priority.
He stated that for him, the topmost priority is the need for public sector cold rooms to store and stockpile fish. He explained that currently, the CFC was using private sector cold rooms, which charge them Rs. 0.15-0.17 (15-17 cents) a day per kilo of fish, which cost the corporation a lot of money.
“We want to have cold rooms in Jaffna, Trincomalee, and Minneriya, because we want to be able to buy fish from everywhere and bring it to Colombo.”
He stated that the CFC also has plans to acquire the public sector fish processing plant in Oluvil, which can store 500 tonnes of fish at a time. The plant was built in 2013 near the Oluvil Fisheries Harbour simultaneously with the Oluvil Port and cost Rs. 120 million to construct. However, the plant has never been operational.
This fish processing plant includes modern facilities and is currently the biggest such facility in Sri Lanka. Daulagala also stated that there used to be another public sector fish processing plant in Demodara, but it was no longer functional.
He stated that their second priority is to possess blast freeze capability in the public sector, which is currently done by private sector cold rooms only. The utilisation of these facilities would cost the CFC Rs. 20-25 per kg of fish. Once the fish is bought, it needs to be blast frozen at around -14°C, before being stored in cold rooms.
Daulagala stated that their third priority is to open at least one megastore in every district, to adjust to the current times. He stated that these stores will be used to attract all three markets of low, middle, and high income.
“We do not want to compete with the small-scale fishermen, instead we buy directly from them at a very nominal price, which gives us a competitive price against privately owned supermarkets. We need these megastores because people like to go to a place that looks good and where they can park their cars. Consumers have changed from what they used to be in the old era.”
He stated that as a pilot project, they have already started such a store in Gothatuwa, where they have seen a monthly sale of about 20-25 tonnes.
Furthermore, Daulagala also stated that they want to set up a proper store in Kandy, as they currently only have small fish stalls in that region. The CFC’s most profitable areas are Gampaha, Colombo, and Kalutara, respectively, and the corporation’s presence is minimal in other areas.
“We have sat down and discussed what we want to do with this budgetary allocation, and we have seen that the immediate need is for better infrastructure. So we will put forward our suggestions to the Ministry.”
Whether this Rs. 500 million allocation, or the CFC Chairman’s other plans, result in the first significant profits for the CFC in 20 years, remains to be seen.