“It’s a wild wild market…”

Clamour for credit and indirect pressure exerted to stop investigations have been the main demands of the so called ‘stock market mafia’ existent on the Colombo Bourse, says Tilak Karunaratne, who tendered his resignation as the Chairman of the Securities and Exchange Commission (SEC) on Friday. 

Reluctantly stepping down barely nine months after taking over the position, the former Chairman said that he had tried to fast track investigations into market malpractices under his tenure so as to bring sanity to what he described as ‘a wild market where some people were shooting  from the hip’.

In what could be his first interview with The Nation Gain following his resignation, Karunaratne explains the sequence of events that led him to call it a day and his expressions showed that his main disappointment was that he could not effectively take some of those real perpetrators of the Colombo’s Stock Market to task.

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Highlights of proposals in the Budget 2011

Please find below the highlights of the Budget 2011 speech presented by Sri Lanka President, Mahinda Rajapaksa in Parliament on November 22, 2010. The new budget proposals are given below.



Exports

 
* Impose a CESS on all exports in raw and semi processed form to encourage value added exports from Sri Lanka. Exports of finished goods will only be free from such CESS.

 
* Reduce duties and taxes on machinery, equipment and raw material to enable our enterprises to have affordable access to world class technology.
 

* Lower income tax from 15 percent to 10 percent for industries with domestic value addition in excess of 65 percent and Sri Lankan brand names with patent rights reserved in Sri Lanka.
 

* Income tax of all export companies will be reduced from 15 percent to 12 percent to encourage general exports
 

* Reduce income tax on profits from 35 percent to 28 percent.
 



“I hope these drastic reductions of taxes will promote our export- import economy to increase its contribution from 50 percent to 60 percent during this decade.” - President


 Hotels and Tourism 



* Impose a levy of US$ 20 per bed on all five star hotels which charge a room rate that is less than US$ 125 per night from January 2011 in order to compel all hotels to charge better rates.
 

* Reduce tax on income earnings from tourism and related business from 15 percent to 12 percent.



Motor Vehicles

* Reduce duties and taxes on passenger transportation vehicles by 25 percent.

* Exempt the importation of electric and highbred vehicles from Excise Tax and VAT in order to promote environmental friendly tourism.


Banking

 * Abolish the bank debit tax so that withdrawals from banks will not be liable for any tax

* Reduce VAT on financial services from 20 percent to 12 percent.

* Reduce tax on profits of banking and financial institutions, from 35 percent to 28 percent. However, all banking and financial institutions will be required to register separate Investment Fund Accounts with the Central Bank to transfer all tax savings arising from these proposals.








Capital Market

* Recognize expenditure in relation to listing of new companies and debt instruments as a deductible expenditure for tax purposes subject to a 1 percent of the value of the IPO.

* Increase the Share Transaction Levy from 0.2 percent to 0.3 percent.

* Exempt re-insurance commissions and claims from VAT to reduce the transaction
cost of insurance.

* Exempt unit trust companies from the Economic Service Charge while exchange control restrictions on foreigners and foreign funds investing in unit trusts will be exempted.

* Exempt income derived by unit trusts from investments in listed debentures and equity, from income tax

 

IT/BPO

* Establish a knowledge city in each province linked to university townships.
 

* Intensify tax incentives already available for IT/BPO businesses.

 

* Remove VAT and Nation Building Tax on software.





Telecommunications

* Combine all complex taxes in telecommunications industry and impose a Telecommunications Levy of 20 percent.

* A 2 percent licence fee on gross revenue will be levied in place of licence fees and CESS imposed by the Telecommunication Regulatory Commission.

 * Exempt high-tech equipment and machinery items from duties and VAT at the point of Customs.

 * Levy of Rs. 2 per minute for outgoing International calls and reduce the minimum floor rate for local calls from Rs. 2 per minute to Rs. 1.50 per minute from July 2011 for the benefit of consumers.


Gem and Jewellery
 

*Increase foreign exchange allowances granted to import raw gem stones from US$ 10,000 to US$ 50,000 per person.

* A simplified procedure will be introduced jointly by the Customs, Exchange Control and Export and Import Control Departments to facilitate importation of gems to the country for processing

 * Remove all taxes on raw gem stones at the point of import.


SME sector

* The Government will commit its own resources through the Ministry of Youth Affairs and Skills Development to train 300,000 youths in a wide range of new skills.

* Out of a 3 year commitment of Rs. 16 billion, an allocation of Rs. 5 billion is provided in this Budget for investment in skills development

* All SMEs and underperforming business activities will be assisted to restructure to optimize their businesses. The Government has mobilized Rs. 5,000 million from the World Bank for this

* Write off unpaid tax liabilities up to March 2009 of all enterprises with a turnover below Rs. 100

* Exempt SMEs that operate on sub contracting arrangements from the Economic Service Charge from 1st January 2011.

* Offer a concessionary income tax rate of 10 percent for SMEs.


R&D

* A 200 percent deduction of expenditure incurred by R & D enterprises on activities such as Research and Development, registration of patent, trademarks and designs, automation through technology and training of their work force.

* Allocate Rs 1,000 million to set up an Innovation and Technology Development Fund to finance high quality research and innovations.


Liquor,Tobacco and Casinos

* Allocate a sum of Rs. 200 million to implement “Mathata Thitha” initiative aggressively in every single village and township as a national priority.

* Increase tax on profits of businesses engaged in the manufacture and distribution of liquor, cigarettes, and casinos from 35 percent to 40 percent.


Education

Schools
 

* Develop 1,000 well equipped secondary schools throughout the island over a period of 5 years. Each secondary school will be linked to a number of primary schools. Required funding of Rs. 15 billion has been mobilized from the World Bank and the Asian Development Bank.

* “English as a Life Skill” initiative that was commenced in 2009 will be formally expanded in 2011 by the Ministry of Education. For this initiative, an allocation of Rs. 750 million in 2011 has been proposed.

* Allocate Rs. 100 million in 2011 to support programs under the relevant line ministries for “Trilingual Sri Lanka” initiative.


Universities

* A 3 year development initiative with Rs. 3,000 million from 2011 for all state universities to project with a unique core identity for each university.

* This accelerated development program will also aim at developing university townships with required facilities such as transportation, accommodation and recreation.

* Grant a further Rs. 600 million to transform Peradeniya, Moratuwa, Colombo, Sri Jayawardanapura, Kelaniya and Ruhuna universities to become world class universities in their chosen fields. 



* Introduce a Presidential Awards System to our national universities to be assessed based on their academic and research performances.

 

Health

* A 3 year action plan targeting the control of non communicable diseases will be implemented from 2011 through improvements in the primary healthcare system. An additional allocation of Rs 900 million for this has been proposed.

* Exempt the import of pharmaceutical products from Port and Airport Levy to reduce the cost of medicine.

* Exempt high tech medical and laboratory equipment from import duties and VAT to promote investments in health services.

 

Airlines
 

* Sri Lankan Airlines and Mihin Lanka will be expanded with new aircrafts to increase the fleet to 30 by 2012.

* Exempt SriLankan and Mihin Lanka from all taxes for a period of 10 years to strengthen the two enterprises.


Board of Investment (BOI)

* Revise BOI regulations to offer its incentives to carefully targeted priority sectors.

* Cancel forthwith, all BOI approvals granted before 30th June 2010, if such investment has not commenced or has remained closed as of today. Those who have not commenced work but wish to proceed must obtain fresh approvals.

 

Tourist Boards

* The separation of the former Sri Lanka Tourist Board into four agencies has not served the intended purpose. It has therefore been proposed to merge all agencies except the Hotel School as a single agency capable of effectively promoting tourism.

* New legislation will be introduced to enable this in the first 100 days of 2011.


Income Tax

* Reduce the current tax rates on personal income ranging from 5 to 35 percent to 4 to 24 percent.

* Increase the tax free threshold income from Rs. 300,000 to Rs. 500,000 and the tax slabs from Rs. 400,000 to Rs 500,000.

* Extend this to non-resident Sri Lankans as well.

* Exempt any employee earning Rs.600, 000 per year (Rs.50, 000 per month) from PAYE tax.

* Applicable tax rates for employees earning over Rs. 600,000 will be reduced subject to a maximum rate of 24 percent.

* The new PAYE system will be a final tax at source. Employees will not be required to file returns unless they have other sources of income. 



* Apply the new PAYE system to the public sector as well.

* Increase the tax free threshold on interest income from Rs. 300,000 to Rs. 500,000. The applicable tax slab will also be increased to reduce the tax burden on those who live from interest income.

* Exempt terminal benefits from Employees Provident Fund from income taxation.

* Set up an Employees’ Pension Fund to provide post retirement pension benefits to employees in the private and corporate sectors. Towards this, a 2 percent contribution from employees and a 2 percent contribution from employers to this fund has been proposed.

* The employers will be required to transfer the entirety of the gratuity payment to this fund.

* Employees too will be required to transfer 2 percent of their Pension Fund balance at the time they withdraw the Pension Fund, in lieu of future pension benefits from the Employees’ Pension Fund.


Pension Fund

* Set up an Overseas Employees’ Pension Fund (OEPF) for Non Resident Sri Lankans

* Each employee will be required to contribute at least Rs. 12,000 per annum to this fund. The contribution can be made in stages during the year.

* Set up a Citizens’ Pension and Insurance Fund (CPIF) for the unorganized sector.

* Merge all existing schemes under various agencies to this new Citizens’ Pension and Insurance Fund. Every one seeking membership would have to contribute a minimum of Rs 5,000 per year as and when they have money. Pension will be available after contributing for a period of 10 years and after reaching 65 years of age. The Government will contribute Rs 1,000 million in 2011 to form this new fund. Nearly 3 million persons engaged in agriculture, fisheries, transport, construction, self employment etc. will be the target groups of this fund.


Construction

* Reduce income tax on the construction industry from 15 percent to 12 percent.

* In order to maintain a proper data base and to ensure that every house is added to the system, an Information Secretariat will be established.

* Allocate Rs. 500 million for the early completion of the already initiated housing schemes.





Plantation

* Increase the subsidy by Rs. 50,000 per hectare to small holder tea in order to encourage replanting and new planting

* Give a 6 months notice period for companies to put unused lands in to productive use. If plantation companies do not comply with this deadline, such unutilized lands will be distributed among small holders for re-plantation.

* Increase the export CESS on bulk tea to Rs. 10 per kg.


Raw rubber production

* Give a 50 percent subsidy to popularize the use of rain guards, to increase production from the existing plantations. Therefore, increase the budgetary allocation of the Department of Rubber from Rs. 500 million to 750 million.

* Increase the CESS on the export of raw rubber from Rs. 4 per kg to Rs. 8 per kg to encourage value added exports.


 

Agrarian Economy and Food Security
 

* A 3 year accelerated seed farm development initiative from 2011 at a cost of Rs. 700 million is to be established.

* Grant a 5 year tax exemption for investment in seed farming.

* Implement a 5 year subsidy scheme for planting and replanting of spices

* Rs. 900 million will be allocated for a 3 year partnership initiative between the Provincial Councils and the Department of Agrarian Services to rehabilitate all minor irrigation schemes in the country.

 

Fishing
 

* Remove registration fees, renewal fees and operational charges on annual licences for fishery boats to give relief to small holder fishery activities and simplify administration.

* Grant credit facilities at a concessionary interest rate of 8 percent to promote inland fishery and aquatic resources activities.

* Implement a long term concessionary loan facility for deep sea fishing.

* Exempt the fisheries industry from income tax for period of 5 years.

* The Tourism Development Authority will allocate Rs. 300 million for the development of traditional fishery villages and improve fishery industry based tourism.


Self employment

* Remove the VAT on leasing of assets for three wheeler operators, lorry and truck operators and private bus operators.

* Custom duties on spare parts will also be reduced to moderate the maintenance costs.


Electricity tariff

* Reduce tariff by 25 percent to religious places, government hospitals, schools, vocational training institutions and universities. The present tariff rate will continue for small businesses and SMEs.

* An 8 percent increase in tariff for other users except for the first 90 units.

* The Economic Service Charge will be simplified within a four band rate structure.





Other proposals

* Reduce the Nation Building Tax from 3 percent to 2 percent.

* Remove the Provincial Turnover Tax

* Abolish the Social Responsibility Levy, Rural Infrastructure Development Levy and Debit Tax to simplify taxation.

* Introduce a new legislation within first 100 days of 2011, towards countering anti competitive practices in shipping and trade.
 

* Exempt government agencies from Construction Guarantee Fund Levy to reduce the cost of public investments

* Exempt Ceylon Electricity Board, Ceylon Petroleum Corporation, National Water Supply and Drainage Board and Sri Lanka Ports Authority from income taxes for a period of 5 years.  However, they will be required to pay one fourth of their profit as deemed dividend to the Government



       

Compiled by Azhar Razak

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Colombo under water after record rain

COLOMBO, Thursday 11 November 2010 (AFP) - Floods following the heaviest rains in 18 years brought parts of Sri Lanka's capital to a standstill on Thursday, officials said.

Boats were deployed by the navy to help marooned residents and police said thousands of houses were under water but there were no immediate reports of casualties.

Telephones and Internet connections were also downed through lightening damage and the authorities shut most public schools and also cancelled a national examination for school children.

Several vehicles were stuck in flooded streets causing traffic chaos.

The met department said 435 mm (17.12 inches) of rain fell on the capital within 14 hours overnight making it the worst since June 1992, when 497 mm of rain fell.

"Heavy rains are due to intermonsoonal activity and we can expect more rain," met chief G. D. Samarasinghe said.

Sri Lanka depends on monsoon rains for irrigation and power generation but the seasonal downpours frequently cause loss of life and damage to property in low-lying areas.

The island's two main monsoon seasons run from May to September and December to February and rains in between are called inter-monsoon activity.

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SRI LANKA CO-HOSTS ICC WORLD CUP 2011

In 2011 Sri Lanka will host the world’s most prestigious event in the cricket calendar, the International Cricket Council World Cup. The games played in February and March will take place in stadiums located in the colonial capital, Colombo, the Southern coastal city of Hambantota and the ancient capital, Kandy. Sri Lanka is currently 2nd in the world cup rankings, closely followed by England in 5th place. As potential favourites to go through to the Quarter and Semi Finals, the England cricket team may have the opportunity to play at one of these venues.

The R. Premadasa Stadium in Colombo is the county’s largest cricket ground, which is capable of holding 35,000 cricket fans. The Pallekele Stadium in Kandy is capable of holding 25,000 visitors. The Mahinda Rajapaksa International Cricket Stadium in Sooriyawewa, Hambantota is being built exclusively for the ICC world cup in order to increase the capacity of Sri Lanka’s stadiums. Sri Lanka will host a total of twelve matches in these three venues raising Sri Lanka’s profile amongst international sport hosts.
 In celebration of this event, the Sri Lankan Tourism is planning to offer special promotional packages to cricket lovers. The packages include accommodation and ground transportation including domestic scenic air travel to the matches in Hambantota and Kandy from Colombo for day and extended tours at the visitor’s request. The packages will include stays in the Mahoora Luxury Safari Camps in the wilderness. Guests can also stay in nearby Yala National Park which has the highest concentration of Leopards in the world, only half an hour by car from Hambantota. In these safari camps, guests will experience life in the jungle in a luxury setting with themed evening meals. The newly launched webpage with the ‘Visit Sri Lanka
2011’ branding includes further details of the packages on offer to visitors at http://www.srilanka.travel/cricket.

The island will provide the perfect backdrop to the ICC world cup as cricket is Sri Lanka’s national sport. The world cup which first began in 1975, taking place every four years has had nine editions to date. 2011 is the tenth anniversary of the event which is set to be one of the largest celebrations to date.





      

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Confusion over 5 SIMs or 25 SIMS per person?

Despite media reports that said Sri Lanka’s Defense Ministry had limited use of Mobile SIMS to 5 per person an official from country’s telecom regulator said that the rule has only restricted a person to have 5 SIMS per mobile operator in the country. 

There are currently 5 mobile operators named Dialog, Mobitel, Etisalat, Airtel and Hutch operating in South Asian island nation having nearly 60% of 21 million population using mobile phones. Sri Lanka is said to be the one of the countries that were offering cheapest mobile tariffs in Asia.

“This means that each person can have 5 SIMS from any operator allowing them to have 25 SIMS per person as there is currently 5 operators in the country” said Telecommunication Regulatory Communication (TRC) Chief Anusha Palpita speaking to Asian Tribune.

He clarified that there are no immediate plans to ban individuals from owning more than five mobile-phone SIM cards, while many were in argue that it was reported earlier that according to a Defense Ministry order that each person in the country is only allowed to have only five SIM cards.

However Defense Ministry had issued a fresh notice earlier in October directing every telecom operator to register their subscribers to prove ownership of their respective SIM cards.

Thus all SIM cards which are not registered by December 31st 2010 would be terminated according to reports.

Under this set up, Sri Lanka will tighten mobile phone regulations by forcing service providers to maintain full details of phone users.

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India, Sri Lanka to sign agreement on ferry service soon

India and Sri Lanka would soon sign an agreement to commence ferry service between Tamil Nadu and the island nation, a step towards promoting tourism between the two countries.

"The proposal would go to the Cabinet soon for approval and after that Memorandum of Understanding can be signed for the same," a shipping ministry official told PTI. The ferry service would be from Tuticorin in Tamil Nadu to Colombo in Sri Lanka and Rameswaram to Thalaimannar, respectively.



"It (ferry service) would be for both cargo as well as passenger traffic...but mainly for tourism purpose," the official said, adding that the vessels would come from a private party, but refused to divulge the details.



"The proposal would go to the cabinet soon and the MoU can be expected by December this year," he further added.



The travelling time through the sea from Tuticorin to Colombo is approximately 10 hours and from Rameswaram to Thalaimannar is about three hours.



India currently has cargo operations from the Tuticorin Port to Sri Lanka.



The government is looking at investing about $20.8 billion in 276 projects to expand 13 major ports -- Mumbai, Jawaharlal Nehru Port Trust, Kolkata (with Haldia), Chennai, Visakhapatanam, Cochin,Paradip, New Mangalore, Marmagao, Ennore, Tuticorin and Kandla in the country.

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Sri Lanka poised to legalise gambling

Sri Lanka's parliament is set to pass a controversial law to legalise gambling today, which the opposition opposes on the grounds that it will increase prostitution.

The government is rushing through legislation that will empower President Mahinda Rajapakse, who also acts as the minister of finance, to grant licences to set up gambling establishments in specified areas.

Casinos and horse-racing bookies have been operating in Sri Lanka for decades, exploiting loopholes in the law to avoid an official ban on gambling.

The government is now proposing to outlaw gambling outlets completely after 2012 unless they obtain a licence. Violators will be subjected to a fine of 45,000 dollars and a five-year jail term.

The opposition is nevertheless opposed to the bill, saying it will lead to de facto red-light districts because of the association of prostitution and gambling.

The bill is likely to be passed, as the government has a comfortable majority in parliament.

The bill, which will be taken up for debate later Wednesday, aims to "provide for the designation of areas in which persons intending to start the business of gaming can set up their establishments."

Sri Lanka's booming tourism industry is keen to set up more entertainment to attract high-spending fun-seekers. Some casinos in the city are also known as pick-up points for foreign and local prostitutes.

The government has recently banned billboards showing scantily clad women, following protests by Buddhist monks, but the country has a vibrant nightlife.

The number of tourists visiting the island has risen sharply after nearly four decades of ethnic conflict came to an end in May last year.

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Skyscanner Travel Trends October 2010

Canaries overtake Costa Del Sol as Tenerife knocks Malaga from top spot

For the first time ever since Skyscanner’s Travel Trends began, Malaga has been knocked off its number one position. It was a close call, but the immensely popular Spanish city has been replaced by rival destination Tenerife. Located in the Canary Islands, Tenerife is much further south than Malaga meaning it maintains a pleasant year-round climate, which likely explains its rise in popularity with British travellers as we move into autumn and winter. 

In an unprecedented surge, Thailand took the biggest gains within the Top Ten, with searches for flights to Bangkok moving up a massive six places to number four. This is the highest ever position for the Thai capital and a record position for any long haul destination. It seems that the civil unrest earlier this year has done little to impact Thailand’s popularity with British travellers, and the destination has particular appeal with another cold UK winter looming

Dublin and Paris also gained positions; the Irish capital moved up four places, and the French capital rose five.

Top 10 Most Popular Cities

1. Tenerife [+1]

2. Malaga [-1]

3. Alicante [0]

4. Bangkok [+6]

5. London [0]

6. New York [-2]

7. Amsterdam [+1]

8. Dublin [+4]

9. Paris [+5]

10. Faro [-1]

Highest Climbers

Flights to Australia continue their rise in popularity, with both Sydney and Melbourne rising five places each. However, it was Riga (+17), Oslo (+13), Bucharest (+15) and Kuala Lumpur (+13) that saw the biggest increase in interest during October.

Biggest Fallers

It seems the party is now over in Ibiza, with searches to the Balearic island dropping 33 places in the popularity charts. Other summer spots also felt the chill of the off season with Crete in Greece falling 30 places, Valencia 19 and Naples 16.

Drop Outs

Greece and Spain saw the only drop outs this month, with Menorca, Reus, Corfu and Rhodes, all disappearing from the 100 most popular destinations.

New Entries

The Far East saw a significant increase in interest with Manila in the Philippines straight in at number 80, Tokyo in at number 89 and Beijing in a 92. Colombo in Sri Lanka also entered the Top 100 at number 94.

About Skyscanner

Skyscanner is a leading travel search site providing instant online comparisons on flight prices for over 670,000 routes and on over 600 airlines, including flights to Tenerife as well car hire, deals and holidays.

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Iran exports $520m technical services to Sri Lanka

TEHRAN – Iran carried out $520 million of technical and engineering services in Sri Lanka, the Iranian Commerce Minister Mehdi Ghazanfari said here on Monday.

During his meeting with the Sri Lankan Foreign Affairs Minister Gamini Lakshman Peiris, Ghazanfari declared Tehran’s readiness to boost economic cooperation with Colombo, IRNA News Agency reported.

During the meeting the two sides discussed construction of a new oil refinery in Sri Lanka by Iranian experts, exporting Iranian LNG to Colombo, and boosting tourism.



For his part Gamini Lakshman Peiris thanked Iranian experts for carrying out projects in Sri Lanka and called for expansion of economic ties between Tehran and Colombo.



The 9th Joint Economy and Trade Cooperation Committee meeting between Iran and Sri Lanka, was held on 13-15 September.



In the meeting the two countries commerce ministers signed six MOUs and cooperation agreements in the fields of customs, sisterhood between Shahid Rajaei and Colombo ports and acceptance of each other’s maritime certificates.



Also in this meeting agreements were made between the two countries in the fields of science, culture, art and standardization.



An increase in trade, holding international exhibitions, enhancing maritime relations and implementing engineering and technical projects were among other agendas during the meeting.



In April 2008, Iran began work in several infrastructure development projects in Sri Lanka, all part of a $1.5 billion loan to the South Asian island. These projects included doubling the oil refinery capacity of Sri Lanka’s Sapugaskanda refinery as well as building a 100-megawatt hydropower project and irrigation plan in Uma Oya. In June 2009, the country signed a $106 million agreement with an Iranian firm to provide electricity to roughly 1,000 villages in Sri Lanka

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Shell to finalise operations

By Jithendra Antonio

Although the Government sealed the agreement on Shell this week by buying back 51 percent of Shell Gas Lanka Ltd. and 100 percent of Shell Terminals Lanka Ltd. (STLL) for US $ 63 million, the actual deal will only be finalised by November 15, a top official said

“Shell and the Government of Sri Lanka hope to complete the deal as soon as possible, and this is expected by November 15,” said outgoing chairman/managing director of Shell Gas Sri Lanka (SGLL), Walter Sanchez, responding to a question by The Bottom Line.

Sanchez, however, declined to say whether the deal is profitable for Royal Dutch Shell PLC for US $ 63 million stating, “This information is commercially sensitive information and cannot be shared.”

He said that since this is a share sale, all staff working for SGLL, STLL will be transferred to the new buyer but under the same terms and conditions.

As to whether Shell would continue to provide its expertise with any assistance to the local management, Sanchez was of the view that Shell believes it has developed a professional, cost efficient LPG business with strong growth opportunities run by a competent and well trained workforce in the country.

However, when The Bottom Line queried about the issue between the Royal Dutch PLC and its existing island wide distributors in the country who were asking for a payout from the Dutch multinational before its exit, Sanchez said that ‘given this is a sale of shares in the company, the contracts between the distributors with the company will remain in place as at completion of the share sale and will continue to be governed in accordance with their terms’.

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CPC to insist on Rs20bn payback

Subsidised fuels: Furnace oil alone incurs Rs780m loss monthly

State-run Ceylon Petroleum Corporation (CPC) is to request the Treasury to pay back fuel oil subsidy dues running into over rupees twenty billion incurred during the last 24 months.

The Bottom Line learns that a memorandum of cabinet is in the process of being formulated by the Petroleum Resources and Petroleum Resources Development Ministry, appealing either to reimburse losses incurred since November 2008, due to non-payment of subsidy by the Treasury or to set off against taxes due from the CPC.



“The ministry is in the process of calculating the exact amount of losses for the period from 2008 November to 2010 December. In November 2008 the subsidy was withdrawn, and so we have been importing fuel oil at a cost of Rs 52 per litre and selling it to Ceylon Electricity Board (CEB) plus other Independent Power Producers (IPPs) for Rs26. Due to this, the CPC made a loss of Rs12bn during 2009,” a high ranking ministry official said.

Following vehement protests by CPC in the wake of global oil prices going up, it received the government green light to increase the price to Rs40, though still short of Rs15. From furnace (fuel) oil sales, CPC lost a staggering Rs780m each month, he added.

“At present, CPC is importing nearly 30m litres (30,000 tonnes) of low-sulphur fuel oil at an average cost of Rs68 and selling it to Kerawalapitya Combined Cycle Power Plant for Rs52. Losing Rs16 a litre we are incurring a staggering Rs480m loss a month. For other thermal power plants, (CEB and IPPs) we are bringing down nearly 20 million litres (20,000 tonnes) of high-sulphur fuel oil at Rs55 and selling at Rs40 a litre. Losing Rs15 a litre, the CPC is burdened with a nearly Rs300m loss each month,” this official said.

Currently, CPC is making a marginal profit from petrol sales while incurring a marginal loss from both kerosene and diesel fuels.

“If this goes on we will never be able to turnaround CPC and it will soon go bankrupt. What’s more, this is not due to our fault but due to the fault of CEB. What they want is to make profits on their part at the cost of CPC.”

Many had been advocating a cost-reflective pricing mechanism devoid of political interference if the country was to make state entities like the CPC viable to contribute to the growth of the country and move towards a global energy hub.

“Except for the Kerawalapitiya agreement, all other contracts with CEB and IPPs have the clause that CPC will sell fuel at ‘CPC’s retail price or government-decided price’. This is where all troubles begin. Sri Lanka can never become an energy hub if you don’t make CPC profitable. Privatisation is unnecessary, but you need to have an unwavering cost-based pricing system,” this official added.

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Govt should use mobile phones to tackle poverty: UNCTAD

By Azhar Razak

Governments and policymakers in developing countries should take full advantage of Information and Communication Technologies (ICTs) to combat poverty reduction, a recent research report has highlighted. ‘The Information Economy Report 2010’ prepared by the UN Conference on Trade and Development (UNCTAD) highlights that mobile phones will be the best medium to combat poverty, as the penetration rate for this medium of communication is significantly higher than that of other ICTs and is even used by the people at the Bottom of the Pyramid (BOP).

“A recent study by LIRNEasia of some farmers near Dambulla found that they were able to obtain a premium of 23.4% on the average daily market prices at the Dambulla Dedicated Economic Centre (DDEC) by having access to timely and accurate market price information via their mobile phones,” the senior research manager at the regional policy think tank LIRNEasia, Sriganesh Loganathan, told a recent press conference organised to release the UNCTAD report.

He said that poor people often lack information that is critical for their work, for example, market-prices (such as the service offered by Tradenet in Sri Lanka), income earning opportunities, crop advisory, weather forecasts, agricultural best-practices, health, finance and even information on disaster risk reduction.

“There is an informational dimension to poverty. Lack of access to information increases the vulnerability of the poor. However, the rapid diffusion of mobile phone technology is making it possible for poor people to have access to this information as well as to engage in interactive communication,” Loganathan said.

Meanwhile, Founding Chair and CEO of LIRNEasia Professor Rohan Samarajiva outlined the UNCTAD report that micro-enterprises in low-income countries are rapidly adopting mobile phones as key tools for advancing their commercial activities.

“In more and more low-income countries, it has been found that people at the BOP such as farmers, fishermen and small-time entrepreneurs are using mobile phones to assist their livelihoods, as the technology is now simple and affordable enough,” he said adding that new jobs have arisen catering to local demand for mobile phones and the associated applications and services.

“Many low-income people are selling airtime or mobile money services on the street or in shops as this work can be done by people with few formal skills,” Professor Samarajiva analysed.

Over the past few years, the penetration rate of mobile phones in the world’s least developed countries (LDCs) has surged from 2 to 25 subscriptions per 100 inhabitants.

In Sri Lanka, it has been estimated that more than 75 percent of households have some kind of phone in them.

“However, during our survey in Sri Lanka we also found that only 50 percent of the time spent on mobile phones is being used for productive purposes whereas in countries like Bangladesh and Philippines it is over 90 percent,” LIRNEasia Senior Research Manager Ayesha Zainudeen said.

Therefore, she suggested that the attitude towards mobile phones need changing in Sri Lanka and that we should encourage the evolvement of trade facilities (through mobiles) such as Cellbazaar in Bangladesh to make productive use of mobiles.

Multiple SIM usage

Meanwhile, Professor Samarajiva commenting on the recent decision taken by the Telecommunications Regulatory Commission of Sri Lanka (TRCSL) to limit the number of SIM cards registered under one individual to five, said that the authority should not have placed such a restriction since it curtails consumer choice but should put in place a central database where mobile users can check on how many SIM cards have been registered under their specific names which could increase the overall transparency in the system.

“Pakistan has now put in place such a database and it is now possible for users there to check how many SIM cards are registered under their names,” he said.

He elaborated that during a survey in Pakistan, it was revealed that a person who was using only two SIMs for himself had found that another 90 SIMs were registered falsely under his name when he had checked the database.

“It as an issue for national security as well,” Professor Samarajiva noted.

LIRNEasia launched UNCTAD’s Information Economy Report 2010: ICTs, Enterprises and Poverty Alleviation in Colombo last week. It is learnt that senior researchers from LIRNEasia had also been involved in the preparation of the UNCTAD’s report.

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Mihin Lanka eyes more destinations with new plane

By Azhar Razak

Sri Lanka’s low cost carrier Mihin Lanka, which currently services five destinations, is planning to add three more destinations, following the lease of a new aircraft expected to come on-board in November 2010. According to a senior official of the firm, Mihin Lanka will commence flights to Male in the Maldives, Dhaka in Bangladesh and Jakarta in Indonesia, commencing from next month.

“We will be getting a new A320 aircraft next month in the form of a dry-lease with Airbus Financial Services. We plan to deploy this aircraft to carry passengers to the three new destinations,” Mihin Lanka director cum CEO Kapila Chandrasena told The Bottom Line.

He says the new aircraft, which could carry about 210 passengers, would fly three frequencies to Dhaka, three frequencies to Jakarta and four frequencies to Male in a week.

“This new addition to our fleet is a welcome move, since of late we have been experiencing heavy demand from customers to fly to more destinations,” Chandrasena said.

He said the carrier was making good progress by utilising its single aircraft in fleet at the optimum level.

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