Cemented in losses

Thursday, 22 September 2011 00:00 -     - {{hitsCtrl.values.hits}}

STATE Owned Enterprises (SOEs) are actually owned by the people. The officials managing these corporations should be held accountable for their actions and the latest aberration to this rule comes from the Sri Lanka Cement Corporation.

Parliament was told this week that the Sri Lanka Cement Corporation suffered a loss amounting to Rs. 1,229 million due to management inefficiencies and uneconomic transactions.

The Auditor General’s report for 2009 revealed that the corporation had invested Rs. 1,083 million in Lanka Cement Limited with no returns for the corporation right from the beginning. In reply to the audit query in this regard, the corporation has said this company ceased operations in 1990 due to the war situation in the north.

A similar investment of Rs. 4.8 million had been made in a private company with no returns for the cash-strapped corporation. Though the cement factory in Kankesanthurai ceased operations in 1990, the Cement Corporation has paid Rs. 17 million as salaries to 72 employees. The Auditor General has cited this as an uneconomic transaction. Also, it is observed that a corporate plan was worked for the 2006-2010 period, but no progress has been made to achieve the targets set.

The management of the corporation has responded to the Auditor General saying that although every possible effort was made to achieve the targets, there were obstacles that were beyond the control of the corporation during the year under review. However, the corporation has failed to respond to the query about the uneconomic transaction of Rs. 17 million incurred in the payment of salaries to the employees of Kankesanthurai.

Besides, the report said that Rs. 23 million had been paid as demurrage charges to the port due to the failure to handle the import activities properly. The corporation’s Chairman has replied that he has taken steps to minimise such expenses hereafter. In another instance, 777 cement bags valued at Rs. 463,637 had been damaged in the loading, uploading and transportation.

It has been estimated that due to the wastage and mismanagement of SOEs, as much as 2% of GDP goes down the drain. With hundreds of employees and a wealth of resources at their fingertips, State companies have time and again failed to move outside of their perennial unprofitability.

Everyone knows of the losses at the Ceylon Electricity Board (CEB) and the Ceylon Petroleum Corporation (CPC), yet little has been done to turn these institutions around. The oft-heard excuse that they provide a service for the people and therefore cannot be expected to make profits holds little water, particularly in the instance of the Sri Lanka Cement Corporation.

Just last month the country faced a massive cement shortage that could have been more efficiently met if the relevant institutions, including the corporation, had been properly managed. As it was the authorities were daggers drawn over the cement consignment that was ordered from a Pakistan company that had been banned twice within the last year in Sri Lanka.

Ensuring that quality cement enters the market and that unfair shortages are not caused are the reasons why State-owned cement companies exist. It is surely time to put excuses to rest and see that at least the smaller SOEs are turned profitable and not allowed to waste public funds.