CEB oversight on coal agreements | Daily News

CEB oversight on coal agreements

The government has formulated an oversight mechanism to monitor all agreements entered into by the state-owned Lanka Coal Company (LCC).

Power and Renewable Energy Ministry Secretary Dr. Suren Batagoda told the Daily News that the Ceylon Electricity Board (CEB) is now directly involved in the procurement process, as the Chairman and Chief Legal Officer of the CEB were required to review all agreements entered into by the LCC.

The move comes after Dr. Batagoda, in a missive to CEB Chairman Aruna Wijeypala in September this year, accused the LCC of being ‘unable to shoulder the responsibility’ of calling and awarding coal tenders on its own, and suggested CEB involvement.

In his letter, the Power and Renewable Energy Ministry Secretary had particularly pointed out the LCC’s inability to get suppliers to ‘stick to the rules and regulation set out in the signed agreement, or handle payments in a lawful manner’.

LCC Chairman Maithri Gunaratne speaking to Daily News acceded there had been the need for the LCC to evolve: ‘The LCC has been in operation since 2009,” he explained, “but it is only since the advent of the new government in 2015, that we have entered into a real, competitive bidding process.”

Referring to landmark cases relating to coal supply that were settled at the Supreme Court this year, Gunaratne said the transparent, free and fair manner in which the bidding process was now being conducted, had caused ‘contention’ among suppliers and with it, brought to fore issues that needed dealing with:

“The LCC had to evolve to correct errors that cropped up in the existing system,” he said, adding that the CEB had even heeded Dr. Batagoda’s advise to recruit a younger worker force. The changes to the LCC – incorporated under the Companies Act, No.07 of 2007, consequent to a decision by the Cabinet Ministers to procure and supply coal for coal fired thermal plants of Sri Lanka – has enabled the LCC to procure, for the first time, the total quantity of coal required to the country.

“For the first time in the history of the LCC,” Gunaratne said, “We have procured in excess of 2.2 million tons of coal – more than the total amount of coal required for the country.”

“We have also reduced demurrage (fine on delay or failure to load or discharge a ship within the time agreed) by 500%, and reduced operating costs from in excess of Rs. 21 (per ton of coal) to Rs. 17 +,” he explained. These new arrangements, Power and Renewable Energy Ministry sources said, have streamlined the government’s coal purchasing processes and ensure that the CEB and the LCC are on the same page, on coal purchasing agreements. 

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