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| Sunday, 5 June 2005 |
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Business |  |
| News Business Features Editorial
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Sathosa privatisation - shown as loss making venture During the time of the UNF government Sathosa was shown as a loss making venture and the retail arm was privatised in December 2003. It was purchased by International Grocers Alliance (A consortium of companies representing Richard Peiris and Co, Carson Cumberbatch and Ceylon Biscuits Ltd). Under the agreement 100 % of the management and 40% of the shares were given to IGA for Rs 680 million. At that time 2,000 employees were absorbed to Sathosa Retail Ltd on the same terms and conditions while the then Minister Ravi Karunanayake recruited another 1,700 bringing the headcount to 3,700. At present Sathosa Retail Ltd has 3,157 employees on its payroll while the balance were interdicted or given a golden handshake by the management company. At the time the management was given to IGA, Sathosa had 150 retail outlets. Now it has declined to 143. In May the SRL management delayed to pay the salaries of its employees. They were able to foot the Rs 30 million salary bill after selling its stock at 50, 40 and 30 percent less than the value depending on the expiry dates. In addition SRL discounted the items by 20 percent and sold it to a private individual. Liability As SRL was short of Rs 11 million to pay the salaries after selling the stock IGA has given a loan of Rs. 11 million to SRL. This also will become a liability at the time of takeover, sources said. The sources said though they collected the money to pay the salaries in May they will not have anything to sell to foot the June salary bill. The employees of SRL have warned that they would resort to Trade Union action if they do not get the salaries this month. In the event the government regains control of Sathosa Retail we will resurrect the institution, said a spokesman for the Inter Company Employees' Union SRL branch. We have submitted our proposals to the Minister on how we plan to resurrect the company and we are confident that we can do it. However the government will have to take over and at least manage it as a company and it will have to be done without further delay. The Sathosa outlet at Colombo Commercial Company building earned Rs two lakhs daily but if the outlet was to break even it needed to earn Rs six lakhs per day. Therefore from day one it ran at a loss. Before privatisation the day's collection at Rajagiriya, Jawatta, Kandy and Welisara outlets were more than Rs one million each while the other outlets did business worth more than two lakhs a day. History The Cooperative Wholesale establishment (CWE) was set up in 1942 as a government department to avoid food shortages and smoothen operations during and after World War Two. In 1949 under Act No 47 Sathosa was established and it started operations on July 1, 1950. During the 1960's it gained recognition and moved to the wholesale business . In 1969 the Act was amended and it helped Sathosa to diversify their activities. As a result Asian Hotels, Sathosa Motors, Lanka Milk Foods and Sathosa Printers came into being. As a result of the government's decision to privatise these ventures they became separate entities in 1991. During 1970-77 Sathosa was able to overcome the shortage in consumer goods. After commercialisation by 1994 it had 152 retail outlets. Downfall As most of the government agencies dealing in foodstuffs were closed Sathosa had to import pulses and also purchase paddy. It was a tremendous task but Sathosa undertook it to help the consumer and producer. The sources said the reasons for the downfall of Sathosa were not
adopting a proper channel when purchasing local agri produce, purchasing
goods that were not essential, selecting suppliers on personal
relationships, recruiting personnel when the treasury had issued orders to
the contrary, getting the services of a private security firm while Sathosa
has a security service, transferring the staff at the internal audit
department and getting the services from private companies, keeping the
retail outlets open 24 hours of the day, investing millions to open super
-markets in places where there was no business, stopping the supply of
stationery and play items to government institutions, unnecessary use of
telephones and electricity, supplies not coming to the retail units
systematically, money earned not being used for the future development of
Sathosa , employees who were guilty were not punished accordingly,
malpractices when importing goods, though Sathosa had their own transport
system transport was entrusted to a private company, wastage when
computerising and non payment of money to Sathosa at the time of
implementing government subsidy schemes. |
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