Sri Lanka’s Lak Sathosa loses Rs8.4bn in two years, bank debt spikes to Rs12bn
ECONOMYNEXT – Sri Lanka’s Lak Sathosa, which has a history of procurement corruption and buffer stock fraud, has lost 4.8 billion rupees in 2016 and has accumulated 12.3 billion in bank debt, a government report shows.
According to the latest interim accounts provided by the Treasury Lak Sathosa lost 4.8 billion rupees in 2016 up from 3.6 billion rupees in 2015, taking accumulated losses to 8.4 billion rupees.
In the first five months of 2017 the firm is reporting interim profits of 742 million rupees, but the accounts have not been audited. In 2016 the Treasury initially reported 1.2 billion rupee profit for 2015 which has since become a 3.6 billion rupee losses.
Meanwhile the auditor general following a special probe has bared a massive buffer stock fraud. Sathosa had imported large stocks of rice claiming to maintain a buffer stock to meet local demand but it had no facilities to store grain for long periods.
Storing grain for long periods involves having stores with temperature, humidity, and rodent control, which state grain stores have consistently been unable to do. State agencies usually import rice or other products without import tax, and still manages to lose people’s money.
The AG said the firm lost 15 billion rupees by selling a large stock of imported rice at a loss as animal feed in deals that began during the Rajapaksa regime and continued under the current Sirisena administration.
He also questioned the procurement process.
The loss numbers in the AG’s report does not tally with reported bottom line numbers.
The state owed enterprise had not submitted audited accounts to the parliament for five years.
Lak Sathosa was started by then Commerce Minister Bandula Gunewardene after the original Sathosa (Co-operative Wholesale Administration) collapsed in the late 1990s amid billions of losses and debts to banks.
CWE was bailed out with tax payer funds to repay bank loans, and was in the process of being privatized in 2004 when the Janatha Vimukthi Peramuna opposed it. Eventually all the workers were given a compensated and Sathosa retail was closed.
Lak Sathosa, its new re-incarnation has now borrowed 12.3 billion rupees from state banks up to April 2017, the Treasury report showed.
The Treasury had issued ‘letters of comfort’ to the People’s Bank and Bank of Ceylon to transfer the burden of the Lak Sathosa losses to the people through taxes for millions of dollars of imported products.
By end December 2016, 1.23 billion in capital alone was outstanding on a guarantee issued in 2014 to the People’s Bank, 6.5 billion to Bank of Ceylon and 3.0 billion on a letter issued on July 2015.
Meanwhile current Commerce Minister Rishard Bathiudeen has said he is expanding the retail network. (Colombo/July11/2017)