SPECIAL REPORT : Part 373
By Shamindra Ferdinando
The Ceylon Petroleum Corporation (CPC), on behalf of Sri Lanka, recently entered into an unprecedented Memorandum of Understanding (MoU) with the Hambantota International Port Group (HIPG) to expand its storage and bulk distribution facilities.
Why did CPC need a MoU with HIPG to go ahead with the project?
The signing of the MoU took place on June 8 at the Energy Ministry with Johnson Liu, CEO of HIPG, and Sumith Wijesinghe, Chairman, CPC, representing the two parties. Energy Minister Udaya Gammanpila was present at the signing ceremony. The MoU dealt with the agreement signed between the CPC and the strategic public-private partnership, involving Sri Lanka and China Merchants Port Holdings (CMPort).
The CPC issued just a picture of the event on the day after the signing of the MoU. According to a statement, comprising nine lines, among those present at the signing, in addition to Minister Gammanpila, were Energy Secretary K.D.R. Olga, Additional Secretary, Chaminda Hettiarachchi, and Managing Director of CPC, Buddhika Madihewa.
Tyron Devotta, on behalf of Public Relations firm, Media 360, handling HIPG, issued a comprehensive statement, on June 14, as regards the MoU finalized on June 8. Veteran journalist and columnist, Devotta, quoted, CEO Johnson Liu as having told the June 8 gathering at the Energy Ministry: “The vision of HIPG is to develop the Hambantota International Port (HIP) to become an energy hub for South Asia. Whilst HIPG has put the infrastructure in place to realize that goal, we are also aware that we cannot achieve it without the participation of all the players in the equation. To this end, we recognize the importance of Ceylon Petroleum Corporation as a vital cog in the machinery. The Hambantota Port is encouraged by this move, by the corporation, and as much as it will support the smooth and efficient supply of fuel to the customer, it will also strengthen the position of this Sri Lankan port on the global maritime map.”
The overall project is also subject to the approval of the Sri Lanka Ports Authority (SLPA) in view of its stake in the Hambantota Port project.
The CPC intends to establish a separate state-of-the-art storage terminal and other required facilities on a 50 acre Mahaweli Authority land, for both domestic and export purposes, connected to the HIP, via a pipeline.
Why did the media receive a separate statement that dealt with the issue at hand, lucidly? Devotta explained why Sri Lanka required far larger storage facilities to ensure energy security. Let me quote
Media 360 release verbatim: “The existing storage facility of CPC/CPSTL is sufficient to store refined petroleum product requirements of the entire country for a period of only one month, a capacity below the requirements of ensuring the energy security of the country. CPC currently imports refined petroleum products to cater to, approximately, 70% of the country’s demand, via the Colombo port, and suburbs. The CPC has identified the need to increase its fuel storage capacity to cater to at least three months’ of the country’s demand.”
Energy sector neglected
Successive governments neglected the energy sector, though all recognized the pivotal importance of ensuring energy security. Even after the successful conclusion of the war, in May 2009, the political leadership lacked the vision to take tangible measures to expand storage and bulk distribution facilities, as well as to set up a new refinery.
Over 12 years after the eradication of the Liberation Tigers of Tamil Eelam (LTTE), measures are being taken to develop HIP as a strategic energy centre but, unfortunately, the port is no longer in Sri Lanka’s hands due to the short-sighted policies of the previous yahapalana regime. The statement issued by Media 360 signified the change in the Hambantota scenario brought on during the previous Sirisena-Wickremesinghe administration. The bottom line is that Sri Lanka energy sector projects et al are subject to HIPG approval. That is the reality.
Having invested USD 974 mn in the HIP, as mentioned in the HIPG website, CMPort owns a strong 85 percent of the shares in it, whereas the SLPA’s stake is 15 per cent. CMPort received HIP’s commanding control in 2017 on a 99-year lease granted by the Government of Sri Lanka (GOSL) to develop, manage and operate the port area. The Sirisena-Wickremesinghe government signed the Hambantota port deal in late July 2017.
The then Ports and Shipping Minister Mahinda Samarasinghe, a confidant of President Maithripala Sirisena, signed the agreement, on behalf of Sri Lanka, after Arjuna Ranatunga gave up the portfolios in opposition to the transaction. Ranatunga, who unsuccessfully contested the last general election on the UNP ticket, told the writer recently he couldn’t have accepted the agreement as it was not fair by Sri Lanka. Samarasinghe now represents the SLPP parliamentary group having entered Parliament from the Kalutara District. At that time, Samarasinghe signed the agreement, he was a National List MP courtesy President Sirisena. The President, in his capacity as the SLFP leader, accommodated Samarasinghe on the National List after he failed to retain his seat.
Ranatunga explained how interested parties brazenly manipulated the whole process to the advantage of those seeking control of the HIP. The recently finalized CPC-HIPG MoU underscored that 99-year lease to HIP actually meant the strategic asset cannot be regained in the gainful life time of any Lankan living now. That is the undeniable unpalatable truth. A government that had secured a five-year mandate at the 2015 general election ended up losing an incomparable strategic asset.
Lawmaker Vasudeva Nanayakkara, during the Sirisena-Wickremesinghe administration, made an abortive bid to halt the handing over of the Hambantota port by way of court action. The Supreme Court, however, dismissed Nanayakkara’s action. Today, Nanayakkara and the SLFP that facilitated the Hambantota transaction are represented in President Gotabaya Rajapaksa’s cabinet.
In the wake of the 2015 change of government, the UNP-led administration adopted an extremely hostile stand Vis-a-Vis China. Having accepted US leadership as well as US-India-Japan-Australia security-political and economic partnership, the Sirisena-Wickremesinghe government engaged in a dangerous game much to the discomfort of the public. But, China managed to outmaneuver forces ranged against it and manipulated rapid developments in post-election period. The finalization of agreement in late July 2017 on HIP is nothing but a strategic achievement for Chinese diplomacy. The then Joint Opposition (JO) now recognized as the Sri Lanka Podujana Peramuna (SLPP) had no option but to keep quiet for obvious reasons. It would be pertinent to mention that following the 2015 defeat, Mahinda Rajapaksa, accompanied by former External Affairs Minister Prof. G.L. Peiris, visited Beijing amidst severe criticism of China-Sri Lanka relationship under the previous Rajapaksa government.
CPC-HIPG MoU
The signing of the MoU between the CPC and HIPG didn’t attract the media attention it deserved. The MoU came into being between Minister Gammanpila’s declaration on June 6 on the proposed new refinery at Sapugaskanda to be built at a cost of USD 3 bn (Rs 6,000 bn) on BOT (Build, Operate and Transfer) basis and his announcement of upward revision of fuel prices on Jun 11. The fuel price hike triggered a political turmoil, with SLPP General Secretary Sagara Kariyawasam, MP, of course, with SLPP founder Basil Rajapaksa’s blessings, demanded Minister Gammanpila’s resignation.
Former Attorney General’s Department employee, Attorney-at-Law Kariyawasam received the backing of the vast majority of the SLPP parliamentary group as he took on a small group of government lawmakers, who declared their support for Gammanpila. The battle caused a dicey situation with some speculating a division among the Rajapaksas as regards not only political strategy but future direction of the party as well. The country is in such economic dire straits with the lockdown alone costing billions to the exchequer daily, the ruling coalition cannot, under any circumstances, pave the way for internal squabbles to cause further deterioration. SLPP General Secretary Kariyawasam found fault with the Energy Minister for the substantial price hike. But, can the Pivithuru Hela Urumaya (PHU) leader be held responsible for waste, corruption, irregularities and negligence over a period of time that resulted in the CPC being in debt to the tune of Rs 652 bn to the Bank of Ceylon and the People’s Bank. Both Minister Gammanpila and the Presidential Media Division (PMD) warned that CPC’s loans amounting to Rs 652 bn and the Ceylon Electricity Board’s Rs 85 bn debt could undermine the banking sector and reminded the crisis the country was in.
Unchecked corruption has weakened the national economy to such a degree over the years, the incumbent government is now facing a massive cash flow crisis as it has literally nothing to fall back on.
Unfortunately, corruption continues, unabatedly. Examination of proceedings of the parliamentary watchdog committee reveal corruption is on the march with the support of those constitutionally empowered to address the issue. Debilitated by corruption, successive governments have pursued a despicable strategy in selling national assets. Trade Minister Bandula Gunawardena shamelessly justified the strategy in Parliament on June 8. What Minister Gunawardena basically said was to sell off whatever assets to bridge the budget deficit. Gunawardena owed the electorate an explanation as to how the country would cope once all assets are disposed of, regardless of the consequences.
The previous yahapalana administration reached consensus with Indian investments on four major projects, namely Mattala airport, East Container Terminal (ECT) of the Colombo port, remaining oil tanks at the Trincomalee oil tank farm, and an LNG power plant in Sampur. The collapse of the UNP-SLFP partnership disrupted Indo-Lanka projects. But, the SLPP, having had discussions with India early this year, decided to go ahead with the ECT project, though strong opposition within compelled the government to drop the idea. The SLPP has accused the Weerawansa-Gammanpila-Vasudeva led alliance of sabotaging the ECT project.
Cocktail of political and financial turmoil
Growing Chinese influence by way of investments et al here should be examined in the context of India-US relationship and the ‘Quad Alliance’, comprising US-India-Japan-Australia ganging up to confront real or imagined threats from fast growing China.
The question is whether India is looking for an unnecessary internecine conflict with China thereby unwittingly doing the bidding of the West. All indications are this is Asia’s century with China being the new world number one and India a close second. As we have said before, if these two clash, the traditional West would only be watching with glee the killing of two birds with one stone.
It would be suicidal for Sri Lanka to get entangled or even to wish for any kind of conflict between India and China, both being nuclear armed powers.
Delhi should also keep in mind that it was not China that lit separatist fires right across India into the late 80s and many of those Indian separatist groups had their rear bases in the traditional West.
These big talkers who now lectures at every opportunity about rules based order, followed no rules when they plundered much of the world often committing genocide to grab other people’s lands and unashamedly enslaved millions of black people in particular.
So why is India, having been a victim of such grave humiliation and plunder, now wants to kiss and forgive the same oppressors?
Imagine if there was no China, the West would have ganged up to prevent India from becoming a superpower
It is granted we shouldn’t ignore India’s current and future security concerns. But as long as the Chinese are for mutual economic benefit why can’t India even enter into lucrative trilateral partnerships here.
However given the built up paranoia in New Delhi, India is unlikely to give up its hold on key sectors. The Indian High Commission reacted decisively and swiftly when Energy Minister Gammanpila declared in Colombo on Feb 17, 2021 that the Trincomalee oil tank farm would come under Sri Lanka’s purview. The declaration was made in the presence of Prime Minister Mahinda Rajapaksa at an event to pay compensation for people affected by development projects undertaken by his Ministry. Minister Gammanpila said that he had been able to conclude talks the previous Sunday with the Indian High Commissioner Gopal Bagley (Gammanpila didn’t mention the HC’s name) regarding the taking over of the Trincomalee oil tank farm. He claimed that the High Commissioner accepted his government proposals in that regard though they weren’t compatible with India’s agreement with the Sirisena-Wickremesinghe administration.
Gammanpila expressed confidence in working with the Lanka IOC to develop Trincomalee facilities.
Responding to a media query on joint development of the Upper Oil Tank Farms in Trincomalee (Gammanpila didn’t make any reference to Upper Oil Tank Farms in Trincomalee), the Spokesperson of the Indian High Commission said: “India and Sri Lanka have identified energy partnership as one of the priority dimensions of their cooperation. India is committed to working together with Sri Lanka for the Island’s energy security. In this context, consultation and discussions have been undertaken to promote mutually beneficial cooperation for development and operation of the Upper Oil Tank Farms in Trincomalee. We look forward to continuing our productive engagement with Sri Lanka in this regard”.
Indian HC Bagley visited Lanka IOC’s Trincomalee oil terminal on March 14, 2021. Bagley, in his first visit there, also inspected a grease plant under construction. Once it started production, it would be able to meet Sri Lanka’s entire demand for grease. Perhaps what is significant is Bagley’s inspection of both Upper and Lower Tank farms in Trincomalee. A statement issued by Lanka IOC said that during the visit to the Upper Tank Farm, the High Commissioner was briefed in detail about the current status and the possibilities regarding its usage and development. The visit was made during HC Bagley’s tour of the Northern and Eastern Provinces
In the wake of the 2019 change of government, the incumbent government sounded the possibility of reviewing the agreement on the HIP. China swiftly ruled out that possibility. Sri Lanka (both the government and the Opposition responsible for the present financial crisis, seems to be wholly inadequate to meet the challenges. Decline in the financial and political situation has been further escalated by the raging global pandemic
Covid-19 has paved the way for predatory moves by interested parties.
The US declaration that Sri Lanka wouldn’t be considered for MCC (Millennium Challenge Corporation) Compact and apparent collapse of SOFA (Status of Forces Agreement), also with the US, do not mean end of those endeavours. Sri Lanka entered into ACSA (Access and Cross Servicing Agreement) in August 2017 with the US though MCC and SOFA failed, perhaps a temporary setback for Washington.
