Coal Scams: A Stain on Good Governance
Coal scams at the 900MW Lakvijaya coal power plant have repeatedly made national headlines, been debated heatedly in parliament, and have been the bane of anti-corruption activists.
Corruption in public procurements is not new to Sri Lanka. Only a few weeks back the president harshly criticized the current state of the public procurement process. In a speech at an anti- corruption summit in Colombo, the president stated that over 50 percent of the tender process is corrupt and that officials should be held responsible.
The present administration came into power promising to root out corruption, and yet is in hot water for its’ alleged ‘soft stance’ on the matter. Nobel Resources Pvt Ltd vs. Ministry of Power and Energy, a fundamental rights petition involving a coal tender that reached the Supreme Court of Sri Lanka, revealed the extent of misappropriation of public funds.
Although tenders aim to circumvent corruption, tender-rigging takes place behind the scenes. The Tender Evaluation Committee (TEC), who has the role of selecting the most appropriate applicants, frequently favours corrupt parties.
For example, in Nobel Resources Pvt Ltd V Ministry of Power and Energy, the pretext of tender evaluation was used to grant the tender in favour of Swiss Singapore Overseas Enterprises Pvt Ltd rather than Nobel Resources Pvt. Ltd, to which the TEC had originally recommended the award. Instead, Swiss Singapore Overseas Enterprises Pvt Ltd was favoured by the Standing Cabinet Appointed Procurement Committee and the state procuring arm, Lanka Coal Company Pvt Ltd.
Nobel Power Resources Pvt Ltd, in its petition, claims that its bid was the lowest, and was in accordance to the provisions set in the tender guidelines. Although amendments were made to the tender– changing specifications of the tender itself by the authorities without proper notice, and with stringent rules that bar communication between parties (contained in both the document and government procurement guidelines) — there was a deliberate violation of the tender process. Swiss Singapore Overseas Enterprises Pvt Ltd was wrongly awarded a tender with losses to the public coffers amounting to 1.8 billion rupees.
Nobel Resources Pvt Ltd filed a lawsuit challenging the fraudulent tender award, claiming that it was the legitimate recipient of the award, as it had met all the necessary requirements, unlike the Swiss-Singapore company. However, the respondent argued that the petitioner did not have ‘locus standi’ — ‘the right to bring action’. That the courts were found to have no jurisdiction to determine the case because the Singaporean petitioner, Nobel Resources Pvt Ltd, was neither registered in Sri Lanka, nor did it have a local agent. Regarding this miscarriage of justice, the presiding judge, the Chief Justice of Sri Lanka K. Sripavan, stated that this case “shocked the conscience of the court, especially because awarding a tender involves public funds”. Indeed, public contributions should be utilised in a fair and transparent manner for the benefit of the people, and not for the wrongful, enrichment of a few individuals.
In spite of this finding, the court granted leave to proceed by stating that if the petitioner is turned away on the grounds of locus standi, then that would mean that some government agencies are left free to violate the rule of law, the object of which is to protect citizens from unlawful government action.
What is alarming, however, is the decision for the Ministry of Power and Energy to go ahead with the controversial tender, even while the supreme court found the award to be unlawful. The ministry maintains that the use of the word “may” in the supreme court ruling leaves it open to interpretation, as it is considered discretionary. Although, the word “may” in the courts strongly worded decision should be construed as “shall”, as the Supreme Court reprimands the the malpractices of the ministry and its agents. The interpretation of the word “may” is taken out of context of the courts decision. The Attorney General’s department, to whom the decision was referred, is of the same opinion as the ministry.
It is widely known that coal is damaging to the environment, contributing to climate change, the destruction of landscapes, and causing human displacement. India too has its fair share of scandals; a recent coal procurement scam dealt a significant blow to the former Congress-led UPA alliance.
In Sri Lanka corruption is synonymous with large scale public undertakings. Chinese firms are being awarded contracts with minimum scrutiny, and are being criticized for fraudulent practices. The China Harbour Engineering Company Ltd, a company blacklisted by the World Bank, has attracted several controversies for its dishonest business practices, and is a primary contractor for government projects in Sri Lanka. Even amidst public uproar many contracts — both past and present — are been awarded without calls for tender.
Activists have been voicing possible solutions to root out corruption. One example is the digitization of the central tender process.
E- procurement, according to Sabrina Esufally, head of legal research at Verite Research, will reduce the tender time cycle, increase efficiency and transparency of the tender process. This in turn will address the information gap and administration costs as well as help negate anti competitive practices which hinder market growth.
Another way to strengthen competency in the anti-corruption front is by introducing legislation. In Guyana for example the Procurement Act of 2003 has entailed in law all aspects- ranging from language to international obligations- of the public procurement and penalizes those who violate the law.
Vociferous activism has brought to light a significant number of cases involving fraudulent tenders, highlighting the need for reform. Countries like India and Bangladesh have been successful at implementing digitized public procurement platforms such as those proposed by Esufally. This however raises the question — why are the administrative bodies (eg: National Tender Committee) that are designed to regulate the tender process in the first place unable to implement safeguards to protect public funds?
Zul Karnain Luthifi is a student at Sri Lanka Law College, he can be reached at email@example.com and tweets as @zulster