Alleged Lanka Sathosa rice scams worry industry players

Secretary says Coop Federation can sell to private traders

by Suresh Perera

Two lorry loads of around 50 metric tons of imported rice procured by the state-owned CWE (Cooperative Wholesale Establishment) from Lanka Sathosa were seized at the Pettah market, but the police dropped charges and withdrew the case on the advice of senior Industry and Commerce Ministry officials.

Colombo Crimes Division (CCD) police sleuths, who tailed the two vehicles, discovered that a consignment of approximately 500,000 kilos of par boiled rice (Nadu) imported by Lanka Sathosa from Bangladesh was being channeled to a private trader in Colombo.

The drivers of the two lorries were produced in courts and released on bail, while the stock of rice was ordered to be returned to the CWE. However, on Friday, police told the magistrate the authorities have informed the CCD that there is "provision to sell to private traders and there was no offence committed".

"We withdrew the charges after briefing court on this development as the Ministry took up the position that there is no illegality in selling CWE rice to the Pettah market", CCD chief, ASP Nuwan Wedasinghe explained.

"When they say there is provision for such transactions, we couldn’t press charges against those arrested", he told The Sunday Island. "The charges were withdrawn and the matter ended there".

The CWE procure stocks of rice from Lanka Sathosa to be channeled to cooperative societies across the country, but it is an open secret that some of these consignments change hands with private dealers for hefty kickbacks, industry officials asserted.

The 50 ton consignment seized by the police costs Rs. 85 per kilo in the outside market, but is sold to customers through Lanka Sathosa outlets at a subsidized rate of Rs. 60 per kilo even though it costs the government Rs. 64/98 at the point of import, they said.

"What happened was that the Cooperative Federation had authorized the sale of this stock to the private trade", says T. M. K. B. Tennakoon, the Secretary to the Ministry.

It is true that the CWE cannot sell directly to private parties, but it is incorporated in the Coop Federation’s constitution that they can dispose of their stocks to traders, he clarified. "We informed the police of the position after looking at all these factors".

"It is ridiculous for a government institution, which has been mandated to sell essential consumer commodities at concessionary rates to ease the cost of living burden, to provide stocks to another party merely for disposal to private traders, most of whom are blackmarketeers", the officials countered.

Take the case of Ponni samba, which was sold to the public by Lanka Sathosa at Rs. 75 per kilo, but on a government order in April 2015, the price was reduced to Rs. 69 per kilo, even though the import price was Rs. 74/50 per kilo. This translated into a substantial loss, but the idea was to grant relief to the common people, they said.

In the Pettah market, the same variety of rice is sold between Rs. 90 and 100, which means traders make a killing of Rs. 30 – 40 per kilo, the officials asserted.

Lanka Sathosa has borrowed heavily from the two state banks and a sizeable chunk of its revenue goes towards servicing the loans, they noted.

Many coops don’t even have sufficient rice to service their customers, they claimed. "If rice sold at subsidized prices end up in the Pettah market through other parties, why import them in the first place and suffer losses?"

Even if there were excess stocks, whether imported or otherwise, they should be sold through public tender as it is a government institution, they noted. "The objective is not to boost profits of private traders all out to make a fast buck".

"We are contemplating amending the law to permit the CWE to sell directly to traders as the institution should remain competitive in modern trade", Tennakoon explained.

After the police intervention, stocks of rice are now being diverted to a private warehouse at Orugodawatte, the officials claimed. "The institution will be able to move ahead on its own steam only if backdoor deals with private parties are stemmed".



animated gif
Processing Request
Please Wait...