Officials must pay for this hell of a mess

Officials must pay for this hell of a mess 

Embroiled in crisis after crisis, the fall out from the controversial hedging deal was not what the  loss-making Ceylon Petroleum Corporation (CEYPETCO) least expected to be confronted with.

The hedging deal was signed in 2007 between CEYPETCO and five banks – three international and two local. Though it might have been entered into to escape unscathed from the unprecedented increase in fuel prices it is apparent that the nuts and bolts or the steering wheels and gears involving the whole deal had not been fully studied. The hedging deal is a speculative instrument and in such instruments the loser has to pay. Unfortunately for Sri Lanka the deal  turned sour, when the once soaring fuel price fell deep down an oil well and threatened to drown CEYPETCO now straddled, among other financial commitments, with the London Commercial Court order to pay Standard Chartered Bank (SCB) some US$162 million with accrued interest running into billions of rupees. The Citi Bank and Deutche Bank, the other two international banks, have also sued CEYPETCO, for US$190 million as hedging charges and US$63 million as accrued interest. In all, Sri Lanka might have to pay about US$700 million while the controversial  Treasury Secretary P.B. Jayasundera, who strongly defends the hedging deal, says there will be no problem in paying this staggering amount. Opposition leaders and even Minister Wimal Weerawansa are demanding that this huge sum be paid by the officials responsible and not out of public money.

The government argued that that SCB had been ‘economical with the truth’ by not fully explaining the disadvantages of such a deal. In that case, CEYPETCO should have obtained the services of an independent expert to explain the small print. According to former Chief Justice Sarath Silva who heard fundamental rights petitions on this controversy, the hedging deal was so absurdly unfair that if prices went up by 20 or 30 dollars the banks would pay Sri Lanka only about two dollars extra but if the prices went down by 40 or 50 dollars as they  did, Sri Lanka would have to pay the banks the full amount based on the fixed price.

JVP front-liner Anura Kumara Dissanayake said the Central Bank Governor Nivard Cabraal had told the Cabinet on September 6, 2006 a hedging deal was necessary to offset the losses in purchasing fuel. Mr. Dissanayake said the hedging deal was finalized after a Cabinet-appointed committee of CB officials made its recommendations. It appears that the then CEYPETCO chairman Asantha de Mel and the then Petroleum Minister A.H.M. Fowzie had stepped into an oil well not  knowing that the bottom was much deeper than expected.

With the Rajapaksa regime dodging an opposition request for a debate on the hedging crisis saying the cases were being heard by international courts, the chances of finding out the truth had been lost again. Is it a case of a leaking can of polluted oil such as the stock that ran into so much fire recently?

Once again the question that needs to be asked  is whether those responsible for the multi million dollar debt would be exposed, questioned and punished. Or like in most other cases will they be let off without charges?

/ News

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