Maga Neguma on the road to nowhere!

Road Planing and Development Company, which at one time existed under the Road Development Authority (RDA), was terminated to establish the institutes Maga Neguma Emulsion Private Company, Maga Neguma Road Construction and equipment Company and Maga Neguma Planing Company in 2014.

In an investigative article published on January 24, 2018 it was highlighted as to how Maga Neguma functioned without a proper management thus escaping the scrutiny of the Auditor General’s Department. This was despite Maga Neguma being highly praised during the previous Government. 

Today our effort is to examine what has happened to this institute since then.  

According to a letter drafted by the Attorney General Department dated May 9, 2012, Maga Neguma Emulsion Private Company, Maga Neguma Road Construction and Equipment Company and Maga Neguma Planing Company come under the purview of the COPE.  

• Protests by employees against the shifting of Maga Neguma’s Ranamayura Metal Crushing Plant to a distant location
• Maximum road construction completed by Maga Neguma in 2006 was 2,283 km
• BOI and UDA, and Econ. Dev. Ministry headed by Basil Rajapaksa owe Maga Neguma Rs. 755 mn and 575 mn respectively

However, these three companies seemed to continue their functions without paying any heed to the Attorney General’s view. It must be also said that no interest was shown by the Government with regard to doing an audit on the functions of these three companies.  

The main objectives of Maga Neguma were; the import of machinery necessary for the road construction and to provide facilities of procurement for the contractors, provincial councils, local government authorities and other agents engaged in road construction through selling, leasing and hiring these machinery  

More road construction projects were entrusted to Maga Neguma when Mahinda Rajapaksa was the Minister of Highways while also serving in the capacity as Prime Minister at the time. But there were drastic drop in road construction work entrusted to Maga Neguma following the regime change. 

When asked about the decline of the institute’s turnover, RDA Chairman Nihal Suriyaarachchi said that priority was given to Maga Neguma with regard to urgent projects while other projects were given to the public sector. The efficiency of Maga Neguma can not be achieved merely by assigning more construction projects to it.   

Whenever we asked about the functions of Maga Neguma, the high-ranking officials of the institute made it a habit of forming the opinion that there was uncertainty about the nature of Maga Naguma; as to whether it is a government entity or a private enterprise.  

A former Maga Neguma Chairman Jaliya Padma Raja Kulasekera had even sought legal advice with regard to a dispute against the then administration of the institute.  

Rajeev Senevirathne, who functioned as Maga Neguma Chairman till 2018, said that the activities of Maga Neguma were first subject to the inspection of the Government Audit Department in 2015 after he became the chairman. He went on to claim that though there was a circular specifying that 60% of the institute’s earning should be credited to the Government Treasury it never happened. He also said that some sub contractors associated with construction work have not been paid their dues for a period up to 2015.  

Priyanga Dunusinghe

(Lecture of Economic Department, University of Colombo)

Public Enterprises are established in any country by the Government on the concept of ensuring social welfare in the event of a possible collapse of the market. But in establishing the public enterprises in our country, this need has not been properly considered. Instead they have been established due to political needs

Following the discussions we had with the top level officers and the RDA Chairman, a distinctive decision was made regarding a petition filed by former Chairman Jaliya Padmaraja Kulasekera at No. 3 Commercial High Court in Colombo on July 5, 2018  

The second respondent of the petition - the RDA-maintained that the first respondent - Maga Neguma Machinery Company - was established with the machinery belonging to the RDA and it was sustained on the construction projects entrusted to it by the RDA.   

It was decided that keeping with the Company Law, petitioner Kulasekera has not been able to prove his ownership and was ordered to to pay Rs,50,000 to the respondents. However the petitioner challenged the decision and filed a case of appeal.  

Uncertainty 

Under these circumstances, it seems that Maga Neguma continues to avoid being subject to monitoring under the cover of the uncertainty that prevails whether its owned by the Government.  

On the other hand it is evident that the RDA is reluctant to accept the severity regarding the topic whether this institute is state owned. Even at present Maga Neguma is an institute serving as a job agency and has political clout. Despite the problem regarding the sustainability of the institute, ministers have continued to employ many individuals during the past two years.   

Protests were held by the employees against the shifting of the Ranamayura Metal Crushing Plant of Maga Neguma to a distant location. The protesters also informed the political leader of the area- former Minister of Fisheries and Aquatic Resources Mahinda Amaraweera about this issue. He drew the attention of then Minister of Highways Kabir Hashim through a letter dated April 1, 2018, but there was no favourable response to the request. Minister Amaraweera had to write to Minister Hashim again as employees continue with their protests. Minister Amaraweera had again sent a letter to the relevant authority. In the letter he stressed that employees of this crushing plant are idling and the machinery is not being used.  

Meanwhile, workers of the site also sent a letter, revealing their grievances, to the President through Minister Amaraweera. In the letter it was stated that the Road Construction and Machinery Company’s decision has left close to 800 employees idling without work.  

With the sudden change of the Government on October 26, 2018 three chairmen B.A. Perera, Rajeev Senevirathne and Janaka Herath of Emulsion Private Company, Road Construction Machinery Company and Maga Neguma Planing Company respectively were replaced with new appointees.  

During the 52-day-Government Keerthi Mawella - a senior member of SLFP who had also served as former Secretary to the Late Prime Minister Sirimavo Bandaranaika- was appointed as Maga Neguma Road construction and Machinery Company Chairman.   

When asked about the present situation of the company new Chairman Mawella said the absence of a proper monitoring system has led to the collapse of the entity. Those who served as chairmen of these companies during the Yahapalana regime have done nothing to develop and make the companies profitable. They also have not been competent in implementing planed activities, so as to utilize the movable and fixed assets of the entities to achieve targets.  

After UNP regained power, within a short period of time, Indika Bandara was appointed as the new Chairman of Road Construction and Equipment Company. He said to revive the activities of the company a new plan would be made.  The maximum length of road construction completed by Maga Neguma in 2006 with the output being 2,283 km. However by 2017 it declined to 167 km revealing the deterioration of the function of Maga Neguma.  

Unsettled bills

There are many unsettled bills and Maga Neguma has to receive outstanding dues of  Rs. 575 million from the Economic Development Ministry which was headed by Minister Basil Rajapaksa and Rs. 755 million from the Board of Investment, Urban Development Authority and other state institutions. 

The sub contractors forwarded their bills when the present Government assumed power in 2015. But there were difficulties settling the bills as these contracts had been awarded deviating from the proper procurement procedure. These problems have arisen due to the failure on the part of Maga Neguma with regard to the supervising of the activities of the institutions coming under its purview.  

According to the provisions of the statute for establishment of Maga Neguma only 40% of the revenue generated by it can be used for its sustenance and the rest must be credited to the Treasury. However, such remittances have not been made since 2004!  

Even after this period tenders have been awarded disregarding proper procurement procedures. There is a list of contractors where a close of it shows that they have received contracts with tender procedures not adhered to. It has been revealed that most of these contractors have received the support of politicians when sealing their deals. However this irregularity in procurement procedures has posed difficulties to them in settling bills.  

The maintenance of state entities incurring losses has become a major problem that the country is facing.  

The Government assumed power in 2015 decided to introduce structural changes via a Parliament Act with regard to these business entities as a measure to minimise their losses. The Deputy Minister of State Enterprises Eran Wickremeratne said in Parliament in November 2016 that a bill titled State Enterprises Boards would be presented in 2017.

Indika Bandara

(Chairman of Maga Neguma Road Construction and Equipment)

First Chairman of Maga Neguma Road Construction Machinery Company Jaliya Padmaraja filed a case claiming the ownership of shares of the company. But the Court derided that the company has no right for such ownership

The loss of various Government business entities numbering about 250 in plantation fields, industries, banks and airline service can not be associated with a single reason. However politicization and poor management have been the most prominent negative factor associated with this aspect of the issue, according to Minister Wickremeratne and explained in Parliament.  

Speaking further the minister said that a special board will be appointed under the proposed Act to be passed the following year. According to the minister the board will be entrusted with power to appoint the director boards to all the Government entities. The Minister and any other individual can nominate persons to director boards and the Special Board would select the most eligible persons for each Government business business entity.   

The process of appointing the special board under the proposed Act will be the same that was applied in appointing Commissions under the provisions of the constitution. It is expected to eliminate the politicization and poor management that have become detrimental to the proper functioning of Government business entities, as stated by the minister in Parliament. However, even after a lapse of two years, the minister’s predictions have not come true.  

Instead we continue to hear quarterly from the COPE and other financial review committees the same discouraging and deteriorating state of affairs of government enterprises. Until a proper mechanism is introduced and implemented the country’s people would have to bear the burden of waste and losses made by these institutions.  

“The issue needs a ministerial solution”- Chairman of Maga Neguma Road Construction and Equipment Indika Bandara said.  

The first Chairman of Maga Neguma Road Construction Machinery Company Jaliya Padmaraja filed a case claiming the ownership of shares of the company. But the Court decided that the company has no right for such ownership. Then he appeal challenging the court’s decision. A solution must be sought regarding the nature of this dispute at the ministerial level. Financial statements for the years 2015, 2016 and 2017 have now been finalised while the statement for 2018 is being processed. 

“Public Enterprises have become dissipating institute”-Priyanga Dunusinghe - Lecture of Economic Department, University of Colombo    

Public Enterprises are established in any country by the Government on the concept of ensuring social welfare in the event of a possible collapse of the market. But in establishing the public enterprises in our country, this need has not been properly considered. Instead they have been established due to political needs.Under these circumstances we need to take a closer look at social welfare or market adjustments. Therefore with time these enterprises have become entities that waste public funds.    

This is an unfortunate situation and the relevant authorities should pay their urgent and immediate attention to it. 

(Courtesy Lankadeepa)