Cabinet subcommittee to look for Rs. 4 billion provided for Gin-Nilwala diversion project

The Cabinet of Ministers on Tuesday approved a proposal by the Finance Minister to appoint a Cabinet subcommittee to investigate the Gin-Nilwala diversion project’s proceedings. 

The Cabinet paper submitted by Minister Ravi Karunanayake aims to assess the possibilities of implementing the project by avoiding any additional cost to the country and evaluating the negative impact or cost if the agreement was terminated unilaterally. 

Despite a number of payments made to the Chinese contractor, the company has not commenced work on the project to date, it has been revealed. The committee is also tasked with finding out whether officials involved in granting the project have violated any financial regulations in providing the payments to the Chinese company and the possibilities of recovering the money paid to the company. 

A Cabinet memorandum submitted earlier this year seeking approval to recommence the project and instruct the Ministry of Finance to expedite negotiation to obtain credit facilities from the EXIM Bank of China by the Ministry of Irrigation and Water Resources led to the revelation that although an agreement was signed with the China CAMCE Co. the agreement had not become effective, Karunanayake’s Cabinet paper reveals. Subsequent investigations revealed that the money had been released to the Irrigation Ministry by the Treasury without any projects being specified when releasing the cash.

A total of Rs. 4,011 million has been paid to the Chinese company China CAMCE Co. Ltd since the commencement of the project in November 2014 under the previous regime. The company has received this amount in three different instalments against a standard procedure of paying only 15% of the contract value as an advance payment. Two instalments, totalling over Rs. 3 billion, have been paid on 6 and 7 January 2015. 

After confirming that the China CAMCE Co. Ltd. has not carried out any construction work for the last one and half years, the Ministry of Irrigation has been advised by the Ministry of Finance earlier this year to take necessary action to encash the bank guarantee provided by the contractor.