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Huge power duping!



Who is getting duped? None other than the Finance Ministry itself. The Finance Ministry has forwarded cooked up figures regarding the IPP’s (Individual Power Plants) and their price for a power unit, as well as their fuel used, according to the headlines of a leading newspaper last Sunday. It reports the Finance Ministry has rejected the extension/renewal of these IPP’s contracts, based on inflated and inaccurate figures in the Cabinet Paper.

Now who’s duping who? Who presented these papers to the Cabinet? Is it the Power and Energy Ministry, the CEB or the PM? Obviously, it comes from interested parties who want these IPP’s gone. So, their own players can come into the lucrative business of power generation. What a clever way to get rid of competition. Along with falsely inflated prices, a deliberate error on the fuel used, ‘auto diesel fired’, instead of the actual furnace oil that they use, was made. This makes a huge difference to the energy cost per unit price. The actual energy cost of the IPP’s are around 19.45 per kWh, whereas in an auto diesel powered plant it would be above Rs.25 per KWh.

Despite this, it didn’t put off the CEB from signing letters for 130 mw of auto diesel fired ‘emergency power’ last Thursday! Looks like ‘least cost principle’ in the Sri Lanka Electricity Act is booted out of the window. Where is PUCSL when we need them? Are they already in fold down mode? They need to work their fingers to the bone even if these are their last days, to show Sri Lanka that their contribution matters. This might be the opportunity to rescue their badly damaged reputation. Who can explain the rationale to get rid of 170 mw of power already in the CEB’s least cost generation plan, to make room for ‘emergency power suppliers’ at higher rates? With these kinds of manipulated contracts, the loss to the CEB can run into billions even if they go on only for the next few years.

In today’s The Island feature, Dr.Janaka Ratnasiri notes even President Gotabaya’s visions of Renewable Energy can be scuttled by lethargic or corrupt officials or govt. agencies. Even after having almost all renewable energy resources available at hand, 70% RE by 2030 looks like a tall order for the CEB, going by the enthusiasm shown by them thus far to the Presidents visions of energy sufficient Sri Lanka, which is a vital factor for any other vistas or visions to be realized. Already time has lapsed for some of the reports to be produced, he says. What if the reports produced are of the same calibre as that of the cabinet paper on IPP’s – Faulty and Manipulative? What hope does Sri Lanka have of getting out of the clasps of the hungry power mafia?

Let’s hope the Cabinet will get the chance to look at actual facts again, and figures of all the IPP’s, make informed and unbiased comparisons, and take decisions depending on facts.



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‘Democratic’ impasse and the need for secular action



Today, our democracy is showing its feeblest self from the point of view of the masses. The whole society writhes under the jackboot of oppression, but our democracy, which has been twisted beyond recognition by the rulers to further their own interests, has no easy way out; at least, it doesn’t seem to have any, which is why a whole nation is made to tolerate appalling grief.

It is clear that our democracy is a system that has been manipulated to favour the corrupt and the vulgar, not to favour the masses that need it most. Or, is it that democracy has nothing to do with maintaining social justice and that it is just a concept to be discussed by students of politics? Incidentally, how about religion? What’s its role? To moralise or help get rid of colossal injustice in society? If it is for moralizing, it has pathetically failed in that it hasn’t and will never moralise those who need it most: the power-hungry few, who have brought misery to the entire nation misusing the power vested in them by an ingenuous and devout people.

What moralising do the battered majority need? Perhaps, they don’t need any, because they are not the ones who have been greedy and unscrupulous beyond belief; they are not the ones who have robbed the country for wallowing in unearned luxury, which is not recommended by any religion. They are not the ones who have denied the due share of the country’s assets to its people. It’s the uncouth few at the top – to borrow a line from Joseph Stiglitz, written about political czars of another territory in 1970s – who, “snapped up expensive property and went on grand shopping sprees provide one of the more ostentatious examples of what not to do with one’s newfound wealth”, that need religious tuition urgently.

This is perhaps why, today, the clerics of every conviction, who used to vainly lecture politicians on good governance and shower blessings on them, have now decided to stand with people to help oust them to rid the country of prolonged injustice. We don’t know whether the good priests are still engaged in their respective rituals in the hope of salvaging the country from ruin, but some of them are certainly relying on secular action and joining the crowds to save those who are deprived, humiliated and insulted. Today, there is a noticeable absence of religious rituals publicly organised at times of distress. The Corona epidemic has sufficiently shown that natural or manufactured disasters do not respect supernatural powers, no matter how long people have believed in them. The present calamity has removed all sorts of ‘spiritual’ scales from the eyes of the masses and the priests seem to be willing to join them in their march.

By the way, this is not to say that commoners are lily-white angels descended from heaven. The masses are not all that innocent and sinless, but their wrongs don’t have the potential of bringing down the entire edifice of society. In fact, the common people, and also, the so-called leaders, are trapped in a sinister system that has for long brought about the worst in people. And, there are no prizes for guessing whose ‘sins’ have been more destructive and more easily swept under the carpet. Yet, it is the ‘criminals’ among the hoi polloi that are regularly branded and disparaged by society and punished by the law every so often. The sharks are quite versatile in manipulation and know how to escape the net and even drape themselves in religious flags and earn encomiums from the leading priests.

Today, the slow strangulation of life has made it clear to everybody the grand ride our leaders have taken us for. We see them bearing their teeth behind their religious covers. It is heartening that at least some of our priests have come out of their customary role of moralising and showing carrots in afterlife; instead they are helping the people to wield the remaining democratic sticks to win their rights and dignity in ‘this’ life we all have to live and cannot get away till the end.

Susantha Hewa

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Why do Americans hate Putin so much?



Lawyer and ex-KGB officer, Vladimir Putin, President of the Russian Federation, has pulled together the countries of the Russian Federation after the fall of the Soviet Union in 1979 -1980. He has helped them regain their prosperity. After the fall of Communism, Russia was in the mud, weak and anyone could pick its pockets. Since then it has been a hard and difficult road to climb; but now, Russia and these mid-Asian republics are experiencing some economic prosperity and development.

This rising of the Phoenix or correctly the Duran, the two-headed eagle, has caused abject hostility and hatred in members of both the Democrats and Republican parties in the US. You can only call it irrational, but it is a mass psychosis. The State Department has Nazis who are driven by a hatred of Russia. A certain CIA top officer calls Russians subhuman! This is not rational. Why is this? What has caused this paranoia to take hold of large areas of the US Government, especially those who advise and carry out US international policy?

You must remember that the US Pentagon, the HQ of the US military, needs a constant stream of enemies, in order to ensure a constant stream of funding for itself, and give uninterrupted work for its powerful defence industry. (Once skilled craftsmen and engineers with specialist knowhow are laid off, they are lost, weakening the defence contractor company and the industry.) America, as the most powerful country in the world, is obliged to maintain its status. It thinks it is at the highest point of world civilization, the supremely powerful, most advanced civilization the world has ever known. Therefore, it is exceptional, and superior to all others. It is proud of itself and its power.

But Buddhism says that being proud is a serious form of delusion – madness. This madness leads to false views, wrong thinking and bad decisions. This is costly and/or dangerous for all those who get involved with them. Note that these same ideas about themselves were used by the Nazis of Germany, at that time to justify the Aryan white master race’s desire to conquer and rule the world. Therefore, a mass psychosis, irrationality arose then, and the same psychosis has arisen in America and Europe again, today.

Putin’s crime has been to strengthen the Russian Federation and by doing that, he has unavoidably created a power centre, not under the control of America which is the supreme world power. This is the new enemy the Pentagon needed, irrational as it seems. And together with China and India, these developing, large economies are able to question and challenge US activities around the world. These are most unwelcome developments for the supreme world power and the leader of the free world, who is exceptional, powerful and superior in all its authority.

It is known that recently America wanted to build a military base in Crimea, but Russia, in a very skillful military operation invaded Crimea, to keep it for themselves. They needed it as an outlet for Russia’s shipping to get access to warm-water sea routes. In addition, the people of Crimea are culturally more like Russians than Ukrainians. They are very happy to join Russia and get all the social payments and pensions. This unexpected move has thwarted US plans to have close relations with its Ukrainian ally, and with this association to influence the region. This blocking of US plans has caused US government officials to be very angry.

In addition to US officials’ dislike of growing Russian prosperity, development and power, there is the ‘carry over’ effect of the Russian Hoax. This was a false story or hoax perpetrated on President Donald Trump as soon as he got into office, where false allegations were made and powerful media outlets spouted ant- Trump and anti-Russian damaging stories for four years. They claimed Russia influenced the voting to get Trump into power – all without any evidence. The carry-over from this hoax would add to the bad feelings already held against Russia.

What has been revealed recently is that a considerable proportion of the population of Ukraine – up to 30 percent, support right wing extremism, especially those who live in western Ukraine. Support for this ideology tapers off as you move towards the Russian speaking East. Right wing Ukrainian extremists openly say Russians are inferior due to having been invaded by Mongols, etc., in the past. They also say they want to kill all Russians. These people worship a German Nazi officer, Stephan Bandera, friend of Hitler and who served in the War. At that time there were serious crimes against humanity being committed against Jews in Ukraine, and it was Ukrainians who actively shipped them off to German concentration camps, or massacred them themselves. The area of western Ukraine has some really crazy people. These Nazis of the Ukraine are being used by the US to irritate and undermine Russia.

The US has set up over 30 biological research laboratories doing research into banned, illegal, dangerous biological diseases in Ukraine. Why? Victoria Newland, of the State Department, has acknowledged this as being true. What is the purpose of these? In the Azov Steel Plant, there are extensive underground bunkers. A Canadian General has emerged and is now being questioned by the Russians. There are more US officers underground there, too. Why? What were they doing? Why Generals??

The US will fight Russia up to, and using the last Ukrainian, so the saying goes, as they pull the strings from a distance – from a world apart located on the American continent. The Ukrainian people as a whole are suffering from these plans. With every war in Ukraine it gets geographically smaller, but America does not care for Ukrainians – it cares only for itself.

NATO, as a military alliance for protecting Western Europe, lost its purpose after the fall of Communism. The staff and directors of the organization had to reinvent its purpose, and found one of ever expanding into eastern European countries – and even as far as Central Asia. Everyone warned that this expansion eastwards into Europe would be seen by Russia as a threat to its security and a provocation. Allowing Ukraine to join NATO would mean having ballistic missiles bases installed close to the Russian border, and who could tolerate that?! That was an unacceptable danger for Russia, a red line. Military strategists all around the world knew this NATO expansion would cause a progressive loss of security (or increasing danger) for Russia, and at some point, there would be a counter reaction by Russia.

But still the US carried on with its plans to integrate Ukraine into NATO. NATO acts as a foreign legion for the US around the world. NATO had made promises to Ukraine and Georgia of joining NATO at the Bucharest conference. An insurrection and coup instigated by the US Obama regime occurred in Kiev, Ukraine in February 2016, and the democratically elected president was replaced by a pro American president, surrounded by a team of far-right elements. People of the Donbas region rebelled at this and formed an independent enclave in Ukraine, which the Ukrainian military forces then attacked. Russian speaking Ukrainians were being shot and killed by the Ukrainian army – 13,000 people killed in eight years of shelling. The Ukrainian army were/are using prohibited weapons such as anti-personnel cluster bombs and even white phosphorous bombs – a most horrendous weapon, against the civilian population. Russian police and war crime tribunals are already overwhelmed by many cases. This loss of life went un-reported by the world’s press until Russia finally invaded to save these poor Ukrainian people of the Donbas region. But this action of mercy has been widely condemned around the world. The world’s press, the journalists have double standards, they are not impartial.

Around 2017, France and Germany met in Minsk with Ukrainians to end the killing in the Donbas and settle the problem of the breakaway enclaves peacefully. They set up the Minsk accords. They had met in Minsk and the Ukrainian government signed an agreement to implement these accords. The Ukrainian government was required to stop the shelling and to talk to the leaders of the Donetsk and Lugansk enclaves to get a settlement of the problem. But for eight years Ukraine did nothing to implement the agreement, but continued the shelling and recently, even planned to invade and overrun these Russian speaking Ukrainians in the Donbas.

In January 2022 Russia knew it had to act fast before the Ukrainian Army invaded the Donbas. Russia’s plan was first, simply recognize the Donetsk and Lugansk areas as independent territory, and then invade to protect them from the Ukrainian shelling and expected invasion. And they also needed to neutralize the Ukrainian army to prevent it from starting shelling again after the Russians went away. The Ukrainian army in the area was about 60,000 men.

Those were two large military campaigns, in themselves. Russians realized all the towns along the coast of the Azov Sea were a hotbed of Ukraine army intermingled with far-right fighters following Stepan Bandera. This fact obliged them to also invade Mariupol city, because these extreme right units of the Ukrainian army – the Azov brigade — had a stronghold in the Azovstal steel works there. What is shocking is that the CIA, France and Britain had been training these Nazi forces in an effort to counter any Russia invasion. By doing this they would prolong any war and more people would be killed. When Europe sends weapons to the Ukrainian side, this action also prolongs the war and more people on both sides are killed.

In 1945, Russia drove the Nazi forces back into Berlin at a great cost in human lives, and now, in 2022, it wants to de-Nazify Ukraine, because it does not want such an unpleasant enemy right on their doorstep, especially armed by NATO. After this new military incursion of 2022, the Russian forces have listed out their demands necessary to reach a peace deal with the Ukrainian government. This deNazification has become one of Russia’s main demands. Other demands are the official recognition of Crimea as being part of Russian territory; that the Donbas enclaves be independent, and that they allow the Russian language to be used legally and officially in Ukraine.

But as the fighting is prolonged, Russian demands will grow.

Priyantha Hettige

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Some beliefs on current economic and financial crisis, debt sustainability, Central Bank independence, transparency and accountability



By Jayampathy Molligoda

What is Belief?

“Belief is the central problem in the analysis of mind. Believing seems the most “mental” thing we do. The whole intellectual life consists of beliefs, and of the passage from one belief to another by what is called “reasoning”. Beliefs give knowledge and error; they are the vehicles of truth and falsehood. Psychology, theory of knowledge and metaphysics revolve about belief. What makes a belief true or false I call a ‘fact’. The particular fact that makes a given belief true or false I call its “objective.” – Bertrand Russell, The Analysis of Mind (1921), Lecture. XII: Belief, p. 295

Price stability as core function of CB:

One popular belief is that the government of the day could continue to print money to service its domestic debt and meet other expenditure, but it cannot roll over foreign debt so easily and therefore it is associated with sovereign risk, meaning government is unable to repay its debt. Therefore, the debt sustainability needs to be constantly evaluated by comparing future debt obligations with available reserves to ascertain whether it could meet the debt obligations.

It is generally known that a Central Bank mandate is basically to keep the money that the CB has issued at a given period of time at a ‘stable level’. In other words, one of its main objectives are the price stability; means “maintaining inflation at a low rate’- then it would not discourage people to save and businesses to plan for their future activities, taking into consideration a long- term view on price stability. Some eminent economists are of the view that, having undertaking extensive case studies of economic situations and series of financial crises in several countries over a long period of time, the only one task the Central Bank could accomplish well is ‘maintaining price stability’ through regulating the money supply and interest rates. That’s another belief.

Before 2002, the price stability was the supreme objective although there were many sub objectives assigned to the CBSL. In order to attain ‘price stability’ with certain level of economic growth, the CB is required to keep the money supply of the country at an appropriate level so that the total demand for goods and services known as the ‘aggregate demand’ is just equal to the total supply of goods and services called ‘aggregate supply’. Under Monetary Law Act, the objective of price stability and financial system stability becomes the mandatary rule for the CBSL. As for financial system stability, there is a separate department handling banking supervision at the CB. In the event some banks are in trouble and the CB wants to bail out by giving them some loans, it amounts to printing new money leading to increase in money supply, thus facing difficulties in containing core inflation. Therefore, one belief is that the CB should not compromise its prime ‘price stability’ objective, if inflation becomes the most pressing problem at a given period.

In 2002, the then Governor and the monetary board of the CBSL changed the objective clause to state as “economic and price stability” meaning an additional objective of achieving the country’s economic growth. Some economists believe that achieving the economic growth should be the responsibility of the government and not the Central Bank. Retired Senior Central Banker, Dr. W.A Wijewardena stated in his book on Central Banking published in 2017 that he and many in the Central Bank did not fully understand the wisdom enshrined in the mission statement and then Governor’s belief. It should be mentioned here that there are different economic theories put forward by various eminent economists from time to time and for example, Keynes presented his theory in the form of deficient demand that leads to economic recession during 1929 period in the US and he believed that printing money and spending through government budget would eliminate deficient demand and improve economic growth.

When the government expenditure increases, it raises aggregate demand in the country and policy makers would expect some increases in goods and services through capital formation. In addition, the government could reduce taxes as a policy to induce investments through increased capital formation and together with low interest rate regime, it was expected some increases in the economic growth. The Sri Lankan government adopted this policy since beginning 2020 till end of 2021 with a view to providing relief to people and businesses in order to overcome negative effects due to the COVID 19. However, the economy did not really produce goods and services to the extent that is required, resulting in high inflation from beginning of 2022. It is also true that during the year 2020 the recorded negative growth rate of 3.6% due to the COVID 19 impact has thus been converted into a positive growth rate of 3.7% in 2021. From the beginning 2022, the CBSL adopted a policy of tightening the monetary policy by increasing the interest rates in order to avoid over spending by private and public sector economic players.

Excessive government expenditure including subsidies and debt sustainability:

The responsible governments in other developing countries make every attempt to maintain their expenditure within the revenue and any deficit to be financed through non-inflationary borrowings. As for Sri Lankan situation, there has been a current account deficit in the Balance of payment (BOP) every year -except few years. This means, the FOREX receipts from the transactions with rest of the world are always below the FOREX outflows, even before the foreign debt repayment mainly due to excessive import bill. The tourism proceeds and inward remittances from expats are not enough to bridge the trade deficit. There has not been a single year a ‘surplus’ in the government budget for the last half a century.

Exports as a % of the GDP has come down from 28% during 90’s to 12% from 2014 to date. The GDP of the US $ 25 billion in 2004 has increased to the US $ 85 billion during the last 17 years mainly through services sector- infrastructure development expenditure without corresponding increases in revenue from exports. However, it would have helped to improve tourism proceeds and some export sectors by improvement in the ‘incremental capital out- put’ ratio. my belief is that no proper assessment on the economic cost: benefit of these infrastructure development projects has been undertaken by experts and presented to the ordinary people. My belief is the current crisis has aggravated partly due to the ‘twin deficits’ for a long period of time, meaning the current account deficit in the BOP, which was only US $ 215 million in 2001, thereafter ever increasing and it was US$ 3,343 million in 2021. The government budget deficit of 4-6 %, which is now exceeding 12% (not even a primary surplus before debt service, except in 2017). Further, the GDP per capita in the economy did not really increase to the extent that is required, resulting in high inflation. (GDP at current market price was US $ 85 billion in 2021 compared to US $ 75 Billion in 2014)

Even with the current exchange rate of Rs 366 per dollar, compared to say, Rs 230 per $ as determined by CBSL on 06 March 2022 (thereafter has adopted some kind of a managed float with upper bands), the FCY accounts of commercial banks are still not receiving sufficient foreign currency inflows There is a lack of dollars to meet import bills either through LCs, DP/DA terms or TTs. Almost the entire export sector and other foreign exchange earning businesses are in the hands of private sector, but 25-30% of the import bills of the country consists of most essential items/goods have to be imported by the government through trade finance facilities and credit lines, thus creating further issues on foreign debt sustainability. (See table)

Central Bank independence, transparency and accountability:

Prudent and cautious economists believe that there must be a sound, practical and legal mechanism guaranteeing the independence of the Central Bank, whilst making the CBSL accountable and transparent. John Exter, the founding Governor of the Central Bank of Ceylon, in his report stated that Governor of the Central bank should be of unquestioned integrity and responsibility. This is very critical because an independent CB is essential for maintaining price stability. Dr H.N. Thenuwara, former Director, Economic Research, Central Bank during 2004-6, in his book, ‘Money, inflation and output’ published in 2015 argued that the simplest test is whether the CB can resist demands from the government (a) to print money and/or (b) continue to maintain low interest rate regime, when a higher interest rate is necessary to maintain price stability meaning containing inflationary pressure. This is because the government of the day would naturally tend to push economic growth rates to run at a faster rate than its capacity limit permits and their desire to incur budget deficits by securing funds borrowed from the CB. The section 12 of MLA, the President can appoint any one as the Governor of the CBSL based on the recommendations by the Minister of Finance. However, we believe that the appointment of key positions such as the Governor, CBSL and other Monetary board members should not be solely in the hands of the incumbent President or the Prime Minister, but by the Constitutional Council set up with eminent personalities as its members. The independence of the CBSL must be strengthened along with accountability and transparency task as well. According to the CBSL annual report,2021, the total borrowings by State Owned business Enterprises (SOBE’s) from the banking system continued to expand in 2021 (Rs. 186 billion in ’21, in addition to Rs 184 billion in 2020, thus reflecting weak financial position. My own belief is that the CB must focus on price stability as its core mission as well as ‘financial system stability’ till the current precarious situation is arrested in order to contain the core inflation and fluctuations in the external value of foreign currencies including the US $.

Sovereignty of the people and Separation of power:

One of the most important aspects under the Constitution is the ‘separation of powers’ under peoples’ sovereignty – Article 4. The powers of government under peoples’ sovereignty namely, the Executive, the Legislature and the Judiciary – three most important pillars, must be further strengthened and separated. The writer is of the belief that the Cabinet must consist of only from the members drawn from the National list, except the Prime Minister elected by people through parliamentary elections (in addition to the President). This is to reflect aspirations of the people at grass root level through the elected MPs, as PM could take up those views at the cabinet deliberations before taking decisions. The Cabinet of ministers are charged with policy formulation and if necessary, the concept of District ministers could be introduced and such appointments could be made from other elected members in the parliament, the government expenditure for maintaining the PC system and other duplicate political institutions such as PSs, Municipal , Urban Councils need to be reduced (PC/PS acts of parliament during 1986,7 period) Even the Parliamentary seats can be reduced to 160 based on electoral districts, plus maximum 20 national list members whom they select the cabinet. However, it is important to strengthen GA system and Divisional secretary level administrative powers stemming from ‘Grama Niladharis’ empowering them with ICT.

Evidence- based policy shaping through facts finding-reasoning:

This is a time of reckoning when we need to come together and set aside ideology and egos and focus on problem solving. The positive side – there is an opportunity for the government, if genuinely interested to restructure Ceylon Petroleum Corporation, unbundling CEB, arrange Private: Public partnerships (PPPs) of many institutions like ‘Sri Lankan airline’, PPPs for port development etc. Further, some strategic actions such as any amendments to Monetary Law Act of 1949 thus re -defining Central Bank mandate and mission statement, restructuring finance ministry (MOF) and amalgamate duplicate semi government institutions, close down some other SOEs etc.

The government must make every endeavour to maintain their expenditure within the revenue and any deficit to be financed through non-inflationary borrowings and strengthen accountability and transparency to the people through parliament. We can re-build the economy by eliminating the twin deficits as long as the highest authority level, The President and Prime Minister would handle the geo political realities, especially relationship with India, China, US and create a conducive environment to attract Investments and private sector to operate without unnecessary red tapes. Ideally, this must be done in consultation with the leader of opposition after reaching consensus on nationally important subjects. The issue, since 1952 has been this excessive rival party politics and divided loyalty of voters to different political parties, and unwanted trade union protests etc., whoever in power, have made the government of the day inactive and inefficient and thus resorting to malpractices. The enforcement of law and order and discipline in the society must be strictly enforced.

As articulated by Bertrand Russell in his ‘Analysis of Mind’, belief of people gives knowledge and error; they are the vehicles of truth and falsehood. Therefore, opinions expressed (beliefs) by our ‘Key opinion leaders’(KOLs) such as the religious leaders, eminent academics, professionals top level administrators, the educated youth, the politicians including Cabinet ministers, are either truth or falsehood, but what makes a belief true or false, Russell calls a “fact.”. One can shift his own belief to another belief through the passage from failed one to finding ‘truth’ by what he called “reasoning. This applies to every policy matter, may be hybrid middle path solutions can be the most practical, relevant and appropriate. Therefore, the name of the game is evidence- based policy shaping with clear focus on addressing implementation snags through proper monitoring systems.

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