Govt. caught with fingers in the sugar jar

By Shamindra Ferdinando

The parliamentary Opposition, having plunged into disarray, due to its unpardonable sins of the recent past, shadowed by a string of humiliating electoral debacles, starting with the local government poll of 2018, followed by the 2019 presidential and 2020 general elections, has received a massive adrenaline boost by way of the huge sugar duty scam. It has brought down to earth, once again the high-riding Sri Lanka Podujana Peramuna (SLPP) government, at the worst possible time, with the country reeling economically, due to the continuing Covid-19 pandemic.

The alleged fraud has dealt a severe blow to the SLPP that enjoys a near two-thirds majority in Parliament.

The accusations, as regards the sugar scam, received credence in the wake of the all-party Committee on Public Finance (COPF) declaring, in no uncertain terms, that the government suffered a colossal loss of revenue. The COPF made the declaration on Feb 25, 2021. This was consequent to the COPF calling for a comprehensive report on January 5, 2021, on the alleged sugar duty scam, from the Finance Ministry. The Finance Ministry report was received in the second week of March 2021 (‘Massive revenue loss: Eyebrows raised over inordinate delay in responding to House query,’ with strap line ‘SLPP members say sugar deal black mark on govt’-The Island, March 4, 2021)

Chairman of the COPF, Anura Priyadarshana Yapa, didn’t mince his words when he publicly acknowledged the staggering loss of revenue. State Minister Vidura Wickremanayake and Nalin Fernando, MP, both members of the SLPP, and members of the COPF, had no qualms in declaring, at the Committee meeting, on Feb 25, 2021, the alleged sugar duty scam was nothing but a black mark on the government.

The JVP, that exposed the scam, in Dec 2020, spearheaded a withering attack on the government. JVP leader Anura Kumara Dissanayake, on Dec 12, 2020, named all those who had been allegedly involved in the corrupt deal. Obviously, the SLPP never expected the sugar controversy to take such a nasty turn. Both the JVP and the main Opposition party, the Samagi Jana Balavegaya (SJB), exploited the situation to the hilt. The COPF, chaired by Kurunegala District lawmaker Yapa, threw its weight behind the accusations.

Defending the indefensible!

Last Friday, former JVP National List MP Sunil Handunnetti, on behalf of the Marxist party, filed a fundamental rights application against the sugar duty scam. The exposure of the unprecedented sugar duty scam turned the tables on the government. Under pressure, the government, a few hours after the JVP moved the Supreme Court, hastily called a media briefing, at the Finance Ministry, to explain the controversial sugar duty reduction. The responsibility of countering the accusations fell on Finance Secretary S.R. Attygalle. Defending the indefensible is quite a difficult task.

The previous yahapalana government perpetrated the Treasury bond scams, during the tenure of Attygalle’s predecessor, Dr. R.H.S. Samaratunga.

Attygalle received the appointment as the Secretary to the Treasury and Ministry of Finance, effective 19th November, 2019. Attygalle’s was one of the first appointments made in the wake of Gotabaya Rajapaksa’s victory at the presidential election. Before the latest appointment, Attygalle served as the Deputy Governor of the Central Bank of Sri Lanka (CBSL). Attygalle also held the position of Assistant Governor of the CBSL and had been released to the Ministry of Finance to serve as the Deputy Secretary to the Treasury. It is pertinent to mention that Attygalle received the appointment, as the Secretary to the Treasury and the Ministry of Finance, of the 52-day government (31st October, 2018 to 18th December, 2018) declared illegal by the Supreme Court. That appointment was made in the wake of a constitutional coup. The then President Maithripala Sirisena’s political project failed. Subsequently, Dr. Samaratunga was re-appointed.

In spite of the fact the COPF, being headed by an SLPPer, and it being packed with ruling party members, the government obviously didn’t receive the anticipated protection. The SLPP parliamentary group appeared to have failed to recognize the threat. It proved that it is no longer a case of ‘right or wrong my party’ line of thinking. Having turned a blind eye to the rapidly developing scenario, the SLPP ignored the Finance Commission, calling for a report on the alleged sugar tax scam, from the Finance Ministry. The SLPP parliamentary group disregarded government lawmaker Yapa’s declaration, on Feb 25, 2021, that the report was yet to be submitted. The writer, on March 3, 2021, sought an explanation from lawmaker Yapa as regards the inordinate delay in the Finance Ministry’s response. The former minister explained the report was expected in the following week. The MP was of the view that in spite of the delay, the Finance Ministry would definitely respond.

Although the COPF received the report and was taken up for discussion the following week, Parliament conveniently refrained from issuing a media release on the latest Finance Commission meeting, chaired by lawmaker Yapa. By then, the SLPP realized the alleged sugar tax scam had caused irreparable damage and sought to take some remedial measures. However, Finance Secretary Attygalle’s lackluster response to the alleged scam clearly boomeranged. The JVP and the SJB compared the alleged sugar duty scam with the Treasury bond scams, perpetrated by the UNP, in Feb 2015 and March 2016. They alleged that the losses suffered by the government, as a result of the alleged sugar tax scam, far exceeded the Treasury bond scams. The government struggled to cope up with the allegations. Remedial measures seemed to be futile against the backdrop of the Finance Commission, headed by a senior government member squarely blaming the incumbent administration for the situation.

JVP leader Anura Dissanayake, in his Dec 12, 2020 speech, delivered in Parliament, explained how the alleged fraud took place. Those who watched the explosive speech, online, certainly expected the government to set the record straight. The government so far failed, both in and out of Parliament, to successfully dismiss the JVP allegations. The Treasury Secretary’s response to these accusations obviously worsened the situation.

The COPF, the Committee on Public Enterprises (COPE) and the Committee on Public Accounts (COPA), chaired by SLPP lawmakers, Anura Priyadarshana Yapa, Prof. Charitha Herath and Prof. Tissa Vitharana, have responded magnificently to the daunting task of tackling corruption. There hadn’t been a previous instance of the Finance Commission acting swiftly on allegations as regards such a major fraud. The Opposition, therefore, should recognize the pivotal importance of the role played by anti-corruption watchdogs.

How long will the SLPP let COPF
do its job?

The Island sought an explanation from COPF member, Dr. Harsha de Silva, MP (SJB), regarding the work undertaken by parliamentary watchdog bodies.

The Island: The SJB wanted you to head COPA, COPF and COPE. Many feared the government would place all three under its members to hide corrupt practices. Against that background, how do you see the work carried out by the three outfits? COPF acted courageously in respect of the sugar deal. COPE revealed many corrupt deals that had taken place since 2013. Do you think they are responding to the situation well?

MP Harsha de Silva:

I was nominated to head the COPF. That’s all. The Standing Orders specifically mention that the COPF must be headed by a member of the Opposition. But the government overruled it, using their majority. They appointed MP Anura Priyadarshana Yapa to head the COPF. As a person, he has earned my respect. In fact, he has been quite forthright thus far. It is he who requested the Ministry of Finance to prepare a report on the recent issue with respect to the reduction of the sugar duty. His objective was to determine if the duty reduction was actually passed on to consumers or not. Now the whole country is aware how, while the Treasury had to forego much needed revenue to the tune of Rs 15.9b, a bulk of that benefit ended up with one importer, in particular, and not with consumers, who should have been its beneficiaries. That is why I want the COPF to order a forensic audit to be conducted by the Auditor General. That way we will be able to determine exactly what happened. And then take it forward from there. But it is not about him as a person. It is how long the SLPP will let the COPF do its job. Its actual mandate is to keep an eye on public finance as a whole; revenue, expenditure and loans and debt, etc., of the government. A classic case is when I questioned the Ministry of Finance on their budget figures for 2020 at the COPF. Specifically the COPF is mandated to assess the suitability of assumptions made. There was a huge uproar and they said their estimates on growth and thus the resulting estimates of the budget deficit and debt were accurate. And they stuck to their figures. But we will soon see the real figures as they will have to be released soon. And we will see how they mislead the COPF and the country. So, there it is. The objective of the COPF is to create checks and balances in the nation’s economic management. That’s what a strong legislature is supposed to do. But what we have is a weak legislature where the government controls the COPF, in addition to the COPE and the COPA.”

A post-war pledge

Three days after the eradication of the LTTE, on the banks of the Nanthikadal lagoon, the then President Mahinda Rajapaksa assured that their priority would be to tackle waste and corruption. The promise was made at the parliamentary grounds, on May 22, 2009. President Mahinda Rajapaksa warned members of the government that the war against the LTTE would no longer serve as a shield, in face of public criticism. President Mahinda Rajapaksa acknowledged that the war wouldn’t be an excuse even for him. The Commander-in-Chief vowed that law enforcement agencies would now hunt for robber barons. Amidst the applause of the gathering, the President vowed that he would neutralize waste and corruption the way he crushed LTTE terrorism (President declares war on waste and corruption – The Sunday Island, May 24, 2009). Unfortunately, the situation has deteriorated to such an extent; the CBSL was robbed twice in 2015 and 2016. The frauds were perpetrated by no less a person than the Governor of the CBSL Arjuna Mahendran, a Singaporean, and a personal friend of the then Prime Minister Ranil Wickremesinghe. In spite of repeated assurances, the SLPP hadn’t been able to apprehend Mahendran, widely believed to be living in Singapore, perhaps not.

Those who had remained silent, at the time of the Treasury bond scams, now allege the sugar duty scam caused a much bigger revenue loss. Successive governments engaged in corruption with impunity. Mahendran’s successor, Dr. Indrajith Coomaraswamy, lucidly explained the status of Sri Lanka’s economy before the Presidential Commission of Inquiry (PCol) that probed irregularities at SriLankan Airlines, SriLankan Catering and Mihin Lanka. The statement couldn’t have been made at a better time for those who expected a genuine change in the political environment. Unfortunately, the media, pathetically, failed to provide sufficient coverage to, undoubtedly, the most important statement made by a respected public official, in the recent past, on any issue.

Dr. Coomaraswamy told the PCol that the country was facing a non-virtuous cycle of debt and it was a very fragile situation which could even lead to a debt crisis. “Of course, my colleagues, in the debt department, have plans and the capability to manage it. But it’s the duty of every citizen to act responsibly as regards the government policy,” he told the PCol. Dr. Coomaraswamy emphasized that people should elect MPs who were prudent enough to handle fiscal and monetary matters of the country. “I am not referring to any government, but it’s been the case ever since independence.”

Who abused Finance Ministry?

The CBSL made quite a startling revelation on Friday, July 26, 2019, before the Parliamentary Select Committee (PSC) probing the Easter Sunday attacks.

The CBSL team comprised the Governor of the Central Bank Indrajit Coomaraswamy, Director of Financial Intelligence Unit D.M. Rupasinghe, and Director of the Department of Supervision of Non-Bank Financial Institutions R.R. Jayaratne. Rupasinghe testified in-camera on a request made by Dr. Coomaraswamy.

Jayaratne and Dr. Coomaraswamy set the record straight as regards the Finance Act of 2017, after the then Power, Energy and Business Development Minister, Ravi Karunanayake, challenged CBSL condemnation of the Finance Act. Having stated that the Batticaloa Campus Limited and the Heera Foundation had received funds from Saudi Arabia on seven and 15 occasions, respectively, Jayaratne didn’t mince his words when he declared the new Act weakened the CBSL regulatory role, vis-a-vis illegal transactions.

The PSC probed M.L.A.M. Hizbullah over clandestine money transactions, amidst accusations that both Batticaloa Campus Limited and the Heera Foundation were involved with the National Thowheed Jamaat (NTJ), responsible for the Easter Sunday attacks. At the time of the Easter Sunday attacks, Hizbullah functioned as the Governor of the Eastern Province and he now serves the current Parliament as a UPFA National List member. Hizbullah moved to the East, in early January, 2019.

M.A. Sumanthiran, Chairman of the COPF, was present on the panel of lawmakers at the time the CBSL made the shocking revelation.

When Jayaratne explained as to how the Exchange Control Act, introduced by the UNP-led government, had impeded the CBSL and was weaker than the one previously in operation, Ravi Karunanayake, the one-time Finance Minister, had the audacity to challenge the CBSL.

Karunanayake:

Where does it say such transactions cannot be inquired into in terms of the new Act?

Jayaratne: In accordance with the 2017 Exchange Control Act, Section 30, action cannot be taken.

Karunanayake:

You prepared that Act. Why are you pretending as if you don’t know anything, about it? The CBSL amended it several times and sent it back.

Perhaps Jayaratne could have faced a ministerial onslaught if not for Dr. Coomaraswamy’s swift intervention. Had Dr. Coomaraswamy opted to remain silent, Jayaratne, probably would have had to suffer in silence, unable to talk back to a powerful Minister

Dr. Coomaraswamy:

No Sir. The Act actually was not drafted by us.

Karunanayake:

Why not?

Dr. Coomaraswamy:

No Sir. It was done outside. We were actually very upset about it. We were not included. That was drafted without the CBSL being involved. We were asked to comment on it

JVP MP Dr. Nalinda Jayatissa: If the Batticaloa Campus last received money in 2017, Hizbullah was aware of the new Act being drafted.

Jayaratne:

Yes.

Nalinda Jayatissa:

It could have had happened.

Jayaratne:

Present Act does not at least interpret what it meant by wrong.

Jayaratne:

Unauthorized money transactions were taking place all over the country. Foreign currencies are kept illegally. Transactions do not come into the official banking system, not even one USD.

The exchange between Karunanayake and the CBSL erupted when lawmaker Ashu Marasinghe, sought a clarification as regards the difference in the current and the previous Exchange Control Acts.

Chief of the COPF Sumanthiran remained silent during the exchange between Karunanayake and the CBSL.

The circumstances in which the Finance Act had been introduced have been disputed by no less a person than the CBSL Governor. It would be pertinent to recall the advice given by Dr. Coomaraswamy to the electorate, in late 2018. Dr. Coomaraswamy issued the advice before President Maithripala Sirisena dissolved Parliament, at midnight, on Nov 09, 2018, following the sacking of Premier Ranil Wickremesinghe.

Financial chaos

Examination of statements in Sinhala, Tamil and English, issued by the Communications Department of Parliament, pertaining to the COPE, the COPA and the COPF, since the last general election, would reveal a pathetic state of affairs as far as the national economy is concerned. The statements have revealed an extremely dangerous trend with ministries and various institutions responsible for ensuring checks and balances, undermining the national economy. Revelations pertaining to Customs are quite disturbing and the failure on the part of the COPE, the COPA and the COPF to inquire into serious allegations within a reasonable period. The failure, perhaps, deliberately facilitated fraud, corruption and irregularities over the years. Last week, Parliament revealed a shocking case of corruption involving Customs and Access International (Pvt) Ltd that had taken place in 2013.

An investigation, conducted by the COPA, has revealed that the government suffered a loss of Rs 60 mn due to irregularities involving the Customs and Access International (Pvt) Ltd in the Eastern Province Water Development Project. The COPA revealed at the Committee on Public Accounts held in Parliament recently that the government had to pay an additional amount of Rs. 62,499,656 due to irregularities in the importation of DI pipes and fittings for the Eastern Province Water Development Project, implemented in 2013, with the assistance of the Japan International Cooperation Agency (JAICA). Revelations during the COPA, the COPE and the COPF proceedings are only tip of an iceberg.