(This article was originally published in Daily FT on 21st July 2016)
By Ashwin Hemmathagama – Our Lobby Correspondent
Power and Renewable Energy Minister Ranjith Siyambalapitiya yesterday in Parliament rejected the possibility of fraud in the controversial coal tender, saying that he was confident that all transactions were transparent and legal.
He accused the Opposition of using the wrong formula to calculate the price impact.
Minister Siyambalapitiya urged Parliament to wait for the newly-appointed committee report due by the end of this month.
“In November 2014, the Government floated a tender for the supply of coal for 2015. According to the Minister, eight companies including the old supplier Nobel and the current supplier Swiss Singapore submitted offers. Nobel’s offer got rejected for failing to meet the 1987 regulations on state contracts. However, the tender board allowed Nobel to contest based on the advice of the Attorney General.
“Meanwhile, four other bidders got rejected due to some commercial issues. This is a tender of national interest and with the intention of increasing the competition to bid. The four rejected were also taken back. For this tender, Swiss Singapore placed the lowest bid of $ 82.47 per MT. But there was a technical limitation in Sri Lanka to measure the size of coal submitted. However, the size of the coal supplied was not a concern of any other coal buyers in the world but the weight. By conducting a technical investigation on the 78 shipments of coal received so far we haven’t reconfirmed the size of the coals supplied to Sri Lanka at the point of it being unloaded,” explained Minister Siyambalapitiya.
Outlining the details of this particular transaction, the minister said: “Lakwijaya Power Station, with a generating capacity of 900 MW, requires 2.2 million MT of coal per annum. The coal can be transported during a six-month period from September to April, avoiding rough seas. The first tender floated in 2009 had one bidder. This tender got cancelled due to the high price he quoted. Since then five tenders were floated till 2015. Nobel Resources was awarded the tender during all five times. This particular company was not selected by the tender board but was considered by a committee on appeals or by the Cabinet of Ministers. They always created an artificial shortage of coal during the period in supply, forcing the authorities to award the company the next tender as well. This has been cyclical.”
“Even though Nobel Resources was in agreement to supply coal for $ 68.50-$ 73.40 in 2011 the price was jacked up to $ 74.42 and supplied over 2.2 million MT. Adding more to this, two ships which arrived with coal during rough seas had no option but to turn back. But the coal was given to Thorium Iron, and it is a problem which we are unable to solve even today. The Ceylon Electricity Board incurred a loss of Rs. 400 million due to this incident. The CEB also incurred an estimated loss of Rs. 3,500 million with Nobel Resources failing to provide the necessary stock of coal from September-October 2011 where the power plant was forced to cease its operations.”