1 PARLIAMENTARY SERIES No. 10 PARLIAMENTARY SERIES No. 10 OF THE SIXTH PARLIAMENT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA (SECOND SESSION) SECOND REPORT FROM THE COMMITTEE ON PUBLIC ENTERPRISES Presented by HON. WIJEYADASA RAJAPAKSHE, M.P., Chairman of the Committee on Public Enterprises Ordered by the Parliament of Sri Lanka, to be printed on 24th Friday August, 2007. –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– PRINTED AT THE DEPARTMENT OF GOVERNMENT PRINTING, SRI LANKA TO BE PURCHASED AT THE GOVERNMENT PUBLICATION BUREAU, COLOMBO 7 Prize Rs. 34.00 Postage : Rs. 7.50 SECOND REPORT OF THE COMMITTEE ON PUBLIC ENTERPRISES OF THE 2 PARLIAMENT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA Second Session of the Sixth Parliament HON. MEMBERS OF THE COMMITTEE ON PUBLIC ENTERPRISES 1. Hon. Wijeyadasa Rajapakshe (Chairman of the COPE) 2. Hon. Jeyaraj Fernandopulle (appointed on 17.07.2007) 3. Hon. Anura Piyadharshana Yapa 4. Hon. A. D. Susil Premajayantha 5. Hon. Rohitha Bogollagama 6. Hon. Dilan Perera 7. Hon. Hemakumara Nanayakkara 8. Hon. Lakshamn Yapa Abeywardena 9. Hon. Chandrasiri Gajadeera 10. Hon. Mahinda Amaraweera 11. Hon. Gunaratne Weerakoon – (resigned on 17.07.2007) 12. Hon. Mervyn Silva 13. Hon. Mahindananda Aluthgamage 14. Hon. Navin Dissanayake 15. Hon. Lasantha Alagiyawanna 16. Hon. H. R. Mithrapala 17. Hon. Muthu Sivalingam 18. Hon. Hussain Ahamed Bhaila 19. Hon. Vdivel Suresh 20. Hon. Hasen Ali 21. Hon. (Ven.) Athuraliye Rathana Thero 22. Hon. John Amaratunga 23. Hon. Lakshman Kiriella 24. Hon. Ravi Karunanayake 25. Hon. Anura Dissanayake 26. Hon. Sunil Handunnetti 27. Hon. Piyasiri Wijenayake 28. Hon. Sarath Ranawaka 29. Hon. Mavia S. Senathirajah 30. Hon. Senathirajah Jeyanandamoorthy 31. Hon. Sripathi Sooriyaarachchi 3 PARLIAMENTARY SERIES No. 10 SECOND REPORT OF THE COMMITTEE ON PUBLIC ENTREPRISES (COPE) SECOND SESSION OF THE SIXTH PARLIAMENT The committee on Public Enterprises (COPE) is pleased to present its second report of the sixth Parliament. The COPE for the second session of the sixth Parliament was nominated by the Committee of Selection in terms of the Standing Order No. 126 of the Standing Order of the Parliament of Sri Lanka and announced on 08.03.2006, 07.04.2006, 23.05.2006, and 24.05.2006. During the period from July 2006 to July 2007, Committee met on 106 occasions and examined 70 institutions as follows. Some of them were summoned for several sittings for detail examinations and four Sub-committees were appointed to scrutinize examinations for the special matters arisen on Ceylon Electricity Board, Sri Jayewardenepura General Hospital, Samurdhi Authority of Sri Lanka and Public Enterprises Reform Commission. No. Examined Enterprise No. of Examinations 1. Central Bank of Sri Lanka 02 2. Telecommunication Regulatory Commission of Sri Lanka 02 3. Ceyon Electricity Board 05 4. Bank of Ceylon 04 5. Ceylon Petroleum Corporation 04 6. National Servings Bank 01 7. Geological Survey and Mines Bureau 01 8. Road Development Autority 01 9. Sri Jayewardenepura General Hospital 03 10. Baord of Investment 03 11. Airport and Aviation Services (SL) Ltd. 01 12. Independent Televion Net Work 01 13. National Water Supply and Drainage Board 01 14. National Child Protection Authority of Sri Lanka 01 15. Development Lotteries Board 01 16. State Mortgage and Investment Bank 01 17. National Lotteries Board 01 18. State Engineering Corporation 01 19. People’s Bank 01 20. Institute of Policy Stdies 02 21. Milk Industries of Lanka Company Limited 02 22. Land Reform Commission 02 23. Samuradhi Authority of Sri Lanka 01 24. Public Enterprises Reform Commission 01 25. Sri Lanka Ports Authority 01 26. Urban Development Authority 02 27. The Associated Newspapers of Ceylon Limited 01 SECOND REPORT OF THE COMMITTEE ON PUBLIC ENTERPRISES OF THE 4 PARLIAMENT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA No. Examined Enterprise No. of Examinations 28. Sri Lanka Land Reclamation and Development Corporation 01 29. Securities and Exchange Commission 01 30. National Transport Commission 01 31. Consumer Affairs Authority 01 32. Agricultural and Agrarian Insurance Board 01 33. Sri Lanka Cashew Corporation 01 34. Coconut Development Authority 01 35. Employees’ Trust Fund 01 36. Sri Lanka Rupavahini Corporation 01 37. National Housing Development Authority 02 38. Building Materials Corporation 01 39. Sri Lanka Broadcasting Corporation 01 40. National Youth Services Council 01 41. National Gem and Jewellery Authority 01 42. Sri Lanka Export Development Board 01 43. Sri Lanka Bureau of Foreign Employment 01 44. Southern Development Authority 01 45. Ruhuna Development Bank 01 46. Mahapola Higher Education Scholarship Trust Fund 02 47. Tea Small Holdings Development Authority 01 48. Sri Lanka Tourist Board 01 49. Sri Lanka Council for Agricultural Research Policy 01 50. Elakduwa Plantation Ltd. 02 51. Local Loans and Development Fund 01 52. State Timber Corporation 01 53. Sri Lanka Institute of Advanced Technical Education 02 54. State Pharmaceutical Corporation 01 55. University Grants Commission 01 56. Housing Development Finance Corporation 01 57. University of Colombo 01 58. Co-operative Wholesale Establishment 01 59. Sri Lanka State Plantations Corporation 01 60. Civil Aviation Athority 01 61. National Institute of Fisheries and Nautical Engineering 01 62. Lanka Putra Development Bank 01 63. Open University of Sri Lanka 01 64. University of Peradeniya 01 65. Kurunegala Plantations Ltd. 01 66. National Film Corporation 01 67. Agrahara Trust Fund 01 68. National Development Trust Fund 01 69. Tea Shakthi Fund 01 70. State Pharmaceutical Manufacturing Corporation 02 5 PARLIAMENTARY SERIES No. 10 The Committee haivng examined in detail the performances and current affairs, submitted one report to the Parliament so far and the first report containing observations and findings arising from our examinations of the Auditor-General’s reports and performance reports submitted by the Department of Public Enterprises in respect of the twenty six institutions. This report includes specific observations arising from the examinations of the Committee on Public Enterprises in respect of the following institutions and the general observations. 1. The Associated Newspapers of Ceylon Ltd. 2. Sri Lanka Land Reclamation and Development Corporation 3. Securities and Exchange Commission 4. National Transport Commission 5. Consumer Affairs Authority 6. Agricultural and Agrarian Insurance Board 7. Coconut Development Authority 8. Employees’ Trust Fund 9. National Housing Development Authority 10. Sri Lanka Rupavahini Corporation 11. Building Materials Corporation 12. Sri Lanka Cashew Corporation 13. Sri Lanka Broadcasting Corporation 14. National Youth Services Council 15. National Gem and Jewellery Authority 16. Export Development Board 17. Sri Lanka Bureau of Foreign Employment 18. Southern Development Authority 19. Ruhuna Development Bank 20. Mahapola Higher Education Scholarship Trust Fund GENERAL OBSERVATIONS During its examinations, the Committee identified the following deficiencies and irregularities which were common in nature to the above institutions. * Failures and ommission on the part of the relevant Secretaries to supervise and follow up the performance of the institutions which come within their purview. * Failures and ommission on the part of the relevant Ministers to keep closed observation into the affairs of the institutions which come within the purview of their duties and obligations. * Lack of professionalism in the management of public enterprises. * Key senior management position being held on acting capacity or on contract basis for considerably a long period. * Lack of quality management resulting in losses. SECOND REPORT OF THE COMMITTEE ON PUBLIC ENTERPRISES OF THE 6 PARLIAMENT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA * Very poor attention on profitability, liquidity and financial viability. * Lack of effective internal Audit. * Poor Treasury Management. * Poor Supervision of the Line Ministry. * Idle and under utilized resources. * Absence of good governance practice. * Non-availability of up date Corporate Plans and Action Plans * Delays in submitting of accounts. * Uneconomical transaction and mismanagement of funds * Non-compliance with financial rules and regulations. * Non-adherence with the accepted tender procedures. * Political interference. * Delays or failures in responding to the Committee directives. * Payments of withholding taxes by the institutions which amounts to a payment of double taxes. As a result of the above common deficiencies profitability, liquidity and financial viability of most of the enterprises have been declined. 1. The Associated Newspapers of Ceylon Ltd. (ANCL) (Date of examination 25th August 2006) 1. The Committee examined the ANCL and discussed with the officials present whether they have undertaken a study to ascertain the threats, weaknesses ets. for its viable existence and growth as it has now been found that it is unstable. The Company did not have a Corporate Plan and the Plan drawn by them covered only a period of three years, which was not adequate enough for an organization similar to ANCL since it is in a highly competitive trade ie. news print media. 2. The Committee noted that due to poor management and, lack of strategic planning there has been a severe blow to its survival and down-ward trend has been observed which should be correctly addressed to resolve the problems, and to create a more competitive and a viable