Fuel deal without competitive bidding risks corruption, expert warns

• It will lead to further loss-making of Sri Lankan Airlines and banks
• Says higher electricity prices will cause higher water tariff and price hike on hotel rooms and the entire value chain

In the wake of the new government’s move to strike a fuel supply deal with the Ceylon Petroleum Corporation (CPC) for the Ceylon Electricity Board (CEB) to generate power, a top economic analyst said such a transaction without a competitive bidding process will leave room for corruption.

Dhananath Fernando, Chief Executive Officer (CEO) of Advocata Institute, a leading think-tank, said, in the absence of competitive bidding signals, the CPC can sell petroleum products for CEB at a higher price eventually leading to higher electricity tariff rates.

He said higher electricity prices will cause higher water tariff and price hike on hotel rooms and the entire value chain.  

 Secondly, he said it will trigger political intervention to bring the electricity prices down.  

“Politicians otherwise can ask the CPC to sell petroleum products at a lower cost. It will incur a massive loss for the CPC including corruption. When CPC makes losses generally, they sell rocket fuel for Sri Lankan Airlines at higher prices to cover up losses. It will lead to further loss-making of Sri Lankan Airlines. When CPC and Sri Lankan make losses, both of them have to be bailed out by a guaranteed loan by the two state banks. Generally, those loans do not get paid as it has been a treasury guarantee. In the last budget Rs.450 billion was allocated to refinance banks which is equivalent to three times of PAYE collection for a year. When competitive bidding is missing, the cost of corruption will be added to CPC and CEB balance sheets over a period of time,” he told Daily Mirror.  

He made these remarks in the context of the new government trying to abandon steps initiated by the former government.