Mismanagement, a drawback for profitable ventures

by Gamini WARUSHAMANA

Tough measures have to be taken to protect the Ceylon Petroleum Corporation and Ceylon Petroleum Storage Terminals Limited (CPSLT) which are running at a loss and on the verge of bankruptcy, said the new Minister of Petroleum Susil Premajayanth in an exclusive interview with the Sunday Observer.

Minister of Petroleum Susil Premajayanth

He said that mismanagement and wrong decisions have ruined the two institutions. There are several reasons for the present crisis in these two institutions. There is no discipline in the two organisations and the management is not up to standard. Unnecessary expenditure has drained out financial resources. These organisations have not been run as business ventures. Lack of proper guidance and prioritisation in decision-making has created management issues causing billions of losses.

One example is the controversial hedging agreement. It is one reason for the present financial crisis at the CPC. Some mega projects have been launched without proper studies and on high rate borrowing from commercial banks. These decisions have also contributed to losses in the two ventures.

The main reason for the losses in the CPC is oil supply to Ceylon Electricity Board (CEB) for thermal power generation. Government institutions including Security Forces and Mihin Air owe over Rs. 55 billion to the CPC. In 2009 the net loss of the CPC is over 12 billion. We annually spend over US$ 2 billion to purchase oil. I have summoned a meeting of the top management and we will study the final accounts and do a full audit on all transactions made in the past.

A special audit unit will be established in the Ministry under the guidance and supervision of the Auditor General.

We are seeking possibility of recovering these debts. My immediate concern is to minimise the losses, the Minister said. We will make a recovery plan for the two institutions but cannot expect any credit from commercial banks due to the present status of the two institutions.

“Only option I have is to cut all unnecessary expenditure. All purchases other than new oil supply have been stopped. All foreign trips of the officers have been stopped until further notice,” he said.

The minister said that strengthening the HR Department is another priority. Most of the employees have not been trained in relevant fields. Therefore, they will be trained immediately and the training program will be started with a one day workshop for the top management.

According to normal procedure, the board members should resign after a new Minister is appointed. Therefore, the top management of the two institutions will be changed immediately.

The crude oil price has increased and now it is around US$ 80-85 a barrel. However, still we have not decided on a price revision. Adjustment of domestic oil price to reflect changes in the crude oil price in the international market is difficult because we have to think of its impact on many sectors and resulting cost increase and chain effects. Our priority is to discipline these institutions, bring them to correct track and minimise the losses.

The new Ministry does not have the responsibility of petroleum exploration and that now comes under the Ministry of Finance. However, Minister Premajayanth said that the oil exploration is continuing and drilling will be started by Cairn Sri Lanka in May next year. A Singapore company carried out a feasibility study on establishment of a new refinery. The decision will be taken based on this report. Premajayanth the former Minister of Education said that he does not see much difference between the two ministries. I was the Minister of Power and Energy from April 2004 - November 2005 and covered a much broader scope. When I left the Ministry in 2005, I made the CPC a profitable venture. Today the situation has changed and there is a huge challenge not only for me, but for the country as well.

Premajaynth was one of the Ministers under fire from trade unions and media over various issues in the Ministry of Education in the last five years. However, explaining his experience he said that he is satisfied with what he has done as the Minister of Education.

There were lot of issues in the education sector by the time I took over the Ministry, the education administration had collapsed, principal promotions were not given for over 13 years, teacher education was in crisis as there were shortage of trainers. There were shortage of teachers in many provinces. We filled all these vacancies. I recruited 35,700 new teachers during my period. We have solved issues related to Grade 1 admission to teacher education. However, you should remember education is a fully devolved subject and you need support from provincial councils to solve some issues.

I have drafted a new National Education Act to address the legal issues that obstruct the modernisation of the education system in the country. The new Minister can continue it and get it passed in Parliament, he said.