Mihin tried operational changes sans due process: Official

• Mihin Lanka attempted to change operational plans two years after start 
• Budget carrier failed to give explanations to BOI on change of heart 
• Wanted to halve $ 100 m capital, and reduce percentage of foreign earnings from 70% to 40%  

By Maleesha Sulthanagoda

Mihin Lanka had failed to provide the Board of Investment (BOI) explanations as to why it wanted to change its investment and operational plans in 2009, two years after it began operations, by requesting its $100 million capital to be halved, the Presidential Inquiry heard yesterday.    

Despite repeated requests for clarification made by the Board of Investment (BOI), Mihin Lanka, in 2009, failed to respond to the request made by them for permission to change the clauses of their agreement made by ex-CEO Kapila Chandrasena to halve the budget carrier’s $ 100 million capital, the Presidential Commission of Inquiry (PCoI) into fraud and corruption at SriLankan catering, SriLankan Airlines and Mihin Lanka was told by a top official of the BOI.

Building on a previous hearing in June, BOI Monitoring Department Executive Director Renuka Mangala Weerakone, testifying before the PCoI, noted that a letter sent by the Mihin Lanka CEO to the BOI Director General addressed the issue of re-negotiating the clauses in the agreement between the two organisations. 

Furthermore, she noted that, after this, the acting BOI Investment Director had written to the Mihin Lanka CEO, requesting to give reasons or justification to revise the investment as indicated in the original application as well as to send the revised operation and investment plan. 

During the previous hearing in June, BOI Investment Director Gamini Jayathilaka testified that the BOI had placed several conditions on Mihin Lanka if it were to receive income tax concessions. One of the conditions was that the company must invest $ 100 million in its operations within two years. It was expected to make 70% of its income from foreign currency as the company had suggested that foreign travellers would also use the airline and that there would be a viable cargo operation.

Nonetheless, on 26 February 2009, two years and four months later, CEO of Mihin Lanka Kapila Chandrasena wrote to the BOI and sought permission to amend the agreement it had entered into with the BOI to receive continuous tax concessions. In his letter, he sought permission to change the clauses which stated that the company must invest $ 100 million into its operations within two years and attempted to reduce it to $50 million in five years. He also wanted the income from foreign currency to be reduced to 40% from 70%.

However, despite repeated requests by the BOI for Chandrasena to explain the reasons for the change in the clauses, he had failed to respond, the commission heard. The first request by Chandrasena was sent on 6 March 2009 and was followed by a second on 11 February 2010. However, when the BOI responded to the email request asking for an explanation, Chandrasena had failed to comply.