CT: Power plant tender may cause Rs 40B loss to CEB

By M Rishar M Saleem

As the tug-of-war rages between the Ceylon Electricity Board (CEB) and Public Utilities Commission of Sri Lanka (PUCSL), causing delays to the controversial 300 MW Kerawalapitya LNG power plant, the adverse impact falls yet again on Sri Lanka’s general public.

As reported before by Ceylon FT, the tender procedure has raised the eyebrows of many stakeholders, who harbour doubt in the Government’s sincerity in this tender process. The Government’s self-declared ‘good governance’ policy is shattered, they complain, as the awarded tender violates basic tender processes and is likely to cause colossal financial losses to the country.
Reliable sources reveal the deliberate suppression of facts has led to awarding the tender to a particular ‘blue-evil-eyed’ bidder, which will incur over Rs 45 billion in loss to CEB.

The project has become notorious for the delays in its implementation, which have dragged on for over a year. With a looming power shortage in 2019, it looks as though the impending election year for politicians will be a black-out year for the public.

With the cancellation of Sampur coal-fired power project, a Request for Proposals (RFP) for the Kerawalapitya LNG project was issued in 2016. A total of eight applications for private investment were received from Sri Lanka, Korea, Singapore, China, and Bangladesh by April 2017.
Having rejected two bidders in June 2017, the Technical Evaluation committee (TEC) recommended opening tenders of the other six bidders. The Standing Cabinet Appointed Procurement Committee (SCAPC) overruled the TEC’s decision and decided to open only the bid by the Samsung Corporation of Korea. Despite all opposition, SCAPC had to reject Samsung’s bid on the grounds that it failed to include all important tariffs. Cabinet approval was then sought to open the five remaining bids and approval granted forthwith.
With a newly-appointed SCAPC, after a few months of delay in September 2017, other bids were opened.
The lowest bidder at Rs 14.98 was the 100% Sri Lankan company Lakdhanavi Ltd, with similar-capacity power plant installation experience in the past. The second-lowest bid was at Rs 15.97, and SCAPC recommended proceeding with negotiation with the lowest bidder.

Due to sinister moves by interested parties, this decision was stopped, citing the excuse that Lankdanavi was a subsidiary of CEB, and the tender was to be awarded to the expensive bidder, although this attempt was unsuccessful.

Strangely, in early January 2018, the Power Ministry wrote to the Ministry of Finance seeking clarification whether certain tax exemptions were available to Lakdhanavi with respect to this project. The very next day the Finance Ministry replied (in a letter having a public-private formatting style) that the Bidder (Lakdhanavi) is liable for taxes. Then the TEC withdrew its first report and submitted another, disqualifying Lakdhanavi for assuming “unavailable” tax concessions and recommended the second-lowest bidder as the Lowest Responsive Bidder.

Adding more confusion to an already-confusing matter, two weeks later, the Finance Ministry, in response to a clarification by Lakdhanavi, made a U-turn and admitted that tax concessions were still applicable (this time in a public letter-writing format) but said they were “suspended” on a “policy decision”. However, apparently nobody – not the CEB, nor the Ministry of Power – had been informed about this “policy decision,” putting the surreptitious plans of lobbyists in a spin.

All bidders except the second bidder had assumed the tax exemption. What surprises everybody is that even if the two lowest bidders were compared on an equal footing by adding taxes for Lakdhanavi Tariff as well, the latter is still comfortably the lowest.
Officials now believe TEC’s disqualification of Lakdhanavi for invoking tax concessions available in law is wrong and could be challenged in courts, delaying the project beyond redemption.

The country is thus surely set to have the presidential election amidst power cuts.
The irony is that, according to CEB sources, the entire tax exemption assumed by Lakdhanavi is only Rs 2 billion, whereas if CEB has to buy power from the next bidder, CEB will pay Rs 45 billion more.

We all know the Bond scam robbed the nation of Rs 11 billion. Are we seeing a scam of much greater dimensions in the making?
CEB is already set to make a loss of Rs 80 billion this year. It will only be made worse by selecting the wrong bidder in the Kerawalapitiya combined-cycle project. You, me and the man on the street will pick up these losses of CEB, by way of increased taxes and a higher cost of living. Does anybody have the interest of the Sri Lankan electricity consumer at heart?

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