•   UN Rights Chief issues scathing report, painting a totalitarian picture of Sri Lanka
•   Two successive Cabinet meetings fail to present tangible solution to forex crisis
•   Basil, Cabraal seek to stymie Gammanpila’s efforts to raise money to fund CPC
•   Duminda temporarily takes on Power portfolio; highlights critical coal shipments
•   Supreme Court torpedoes Special GST Bill, leaving Govt. fundraising plans in jeopardy
•   Cardinal declares Easter justice impossible under this Govt., calls for regime change
•   Full Easter Sunday PCoI report given to Parliament sans sections on “national security”

The 49th session of the UN Human Rights Council (UNHRC) that is to commence tomorrow (28) has been eclipsed in both the international as well as local arenas with the Ukraine crisis overseas and the intensifying crisis situation over forex and its rippling effects locally. Foreign Minister Prof. G.L. Peiris is leading the Sri Lanka delegation to the UNHRC. In a preliminary report released last Friday (25) in advance of the sessions, UN High Commissioner for Human Rights Michelle Bachelet made several recommendations that have drawn the ire of the ruling regime. Bachelet called out the Government’s “reliance on the military to run civilian affairs” and urged that steps be taken to allow the “Attorney General’s Department to operate independently in practice and pursue prosecutions against any suspected perpetrators of human rights violations”. She also called for the opening of military files to help locate the disappeared and punish those responsible for their disappearance, asked for real reforms to the PTA and acceleration of the constitution drafting process. The UN Human Rights Chief further called on the Government to “order all security agencies to immediately end all forms of surveillance and harassment of and reprisals against human rights defenders, social actors, and victims and their families,” in a clear sign that her office still views Sri Lanka as a virtually militarised totalitarian police state. She also urged the UNHRC and UN Member states to help protect Sri Lankan rights defenders and civil society organisations, enforce human rights standards in working with the Sri Lankan defence and justice apparatus, and to pressure the Government to increase human rights standards, while reviewing the involvement of Sri Lankan troops in UN peacekeeping missions. However, Foreign Secretary Jayanath Colombage said that Sri Lanka was “better prepared” for this session than it had been in the past. How the Government ultimately responds to the report and deals with member states this week will have a serious impact on the economic dilemma facing the country, which last week led to five-hour power cuts for the first time in over a decade. Domestic crises Public Utilities Commission of Sri Lanka (PUCSL) Chairman Janaka Ratnayake, who recently claimed that the country would not experience power cuts for several months, had to bite his tongue and announce power cuts last week. However, it is yet to be seen for how long generators can supply power to high power consuming institutions during power cuts since the shortage of fuel could pose a challenge in operating generators as well. Trade Unions (TUs) affiliated to the National Water Supply and Drainage Board (NWSDB) meanwhile warned that increasing the duration of daily power cuts could have an adverse impact on the supply of water. The TUs warned that there could be disruptions to the water supply as well. However, the Government continues to be in the dark on a sustainable solution to address the US Dollar crisis in the country that has now cascaded into power and energy crises. Even after a collective nine-hour discussion by the Cabinet of Ministers on two consecutive days last week (duration of five hours on Monday and four hours on Tuesday), the Government is yet to find a proper solution and is continuing to address issues on an ad hoc basis. The fact is that a sum of $ 1,285 million is required for fuel purchases for the next three months and the Government is hopeful of using the anticipated $ 500 million fuel credit line from India for this purpose. While funds were sourced to procure the delayed fuel shipments last week, the stocks are expected to last only about one week. However, when quizzed about the procurement of the next fuel shipments at last week’s Cabinet meetings, Finance Minister Basil Rajapaksa expressed confidence in addressing the issue, leaving Cabinet Ministers baffled, wondering from which magician’s hat Basil intends to pull out funds for the next shipments. Meanwhile, it is learnt that the Finance Ministry will have to make an allocation of around $ 108 million for several coal shipments for the power sector. The first Letter of Credit (LC) for the purpose is to be opened tomorrow (28) and the other three on 2, 7, and 14 March respectively. Basil informed Cabinet last week that the Finance Ministry had a list of commodities that required US Dollars and that the Ministry was taking measures to address them. However, Basil’s attempts at earning revenue for the State coffers continue to face opposition. First it was the 25% Surcharge Tax on 11 pension funds including the Employers’ Provident Fund (EPF) and Employees’ Trust Fund (ETF). The objections raised by the public and trade unions and even members of the Government resulted in the Cabinet deciding not to impose the surcharge on pension funds. The next measure the Finance Ministry has had to rethink is the Special Goods and Services Tax Bill (SGST). The Supreme Court last week informed the Speaker of Parliament that some clauses in the Bill were inconsistent with the Constitution and that it required a two-thirds majority as well as a referendum to be implemented. “Clauses 2, 3 and 4 of the Bill are jointly and severally inconsistent with Article 148 read with Article 76(1) of the Constitution, Clauses 2, 3 and 4 of the Bill are inconsistent with Article 3, read with Article 4(a) and 4(d) of the Constitution, Clauses 2, 3 and 4 of the Bill are inconsistent with Article 12(1), read with Article 3 and 4(d) of the Constitution, Clauses 2 and 3 of the Bill are inconsistent with Article 152 of the Constitution, Clause 9(1) of the Bill is inconsistent with Article 148 of the Constitution, Clause 9(1) of the Bill is inconsistent with Article 149(1) and 150(1) of the Constitution, Clauses 11(1) and 11(3) of the Bill are inconsistent with Article 4(c) read with Article 3 of the Constitution as per the Court decision,” the Speaker announced. Notably, unlike previous Supreme Court determinations on the constitutionality of bills, this decision by the Supreme Court did not indicate that there was any amended version of the Bill that would be constitutional without a referendum and two-thirds majority, dooming its prospects in Parliament. Amidst all the economic chaos, the Department of Census and Statistics (DCS) last week announced that headline inflation in January had risen to 16.8% as against 14% in the previous month. DCS has stated that as per the National Consumer Price Index (NCPI), contributions to the inflation rate of January 2022 from the food group and non-food group was 11.4% and 5.4% respectively, whilst contributions of food and non-food groups to the inflation in January 2021 were 2.7% and 1.0% respectively, resulting in headline inflation of 3.7%. According to the DCS, the reported inflation for January was mainly due to the higher price levels prevailing in both food and non-food groups. Be that as it may, the Government headed by President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa has pinned much hope on the promised assistance by neighbouring India. The stoic response by many ministers to the ongoing forex crisis and the multiple crises related to it has been that the consumers will receive some respite when the Government receives the $ 1.9 billion aid package from India. Finance Minister Basil Rajapaksa was earlier scheduled to travel to India on his second official visit to the country on Friday (25). However, the visit had to be postponed at the last minute due to scheduling issues in India as there were difficulties in fixing meetings with key Indian Government officials. This was the second visit to India that Basil has had to re-schedule. After his first official tour to India last December after assuming office as Finance Minister, Basil was to travel to India last month for an event in Gujarat but had to cancel it due to the event being postponed with a surge in Covid-19 cases reported in India. Basil said early this month that he hoped to finalise the $ 1 billion worth import trade financing by end-February or early March. “This will help ease the Balance of Payment (BOP) pressure on Sri Lanka as India is among the two top trading nations apart from China which have a favourable trade deficit against Sri Lanka,” he added, while Treasury Secretary S.R. Attygalle has also expressed confidence that the $ 1 billion aid package will be received by the first week of March. The Government is also conducting discussions with China on the possibility of restructuring Sri Lanka’s debt to China. However, the Sri Lankan Government is currently facing the challenge of finalising the relevant financial assistance and getting it passed through Indian bureaucracy in order to receive the much-needed respite to the country’s burgeoning economic woes. Cabinet meets twice The Cabinet of Ministers met for the weekly Cabinet meeting via Zoom last Monday (21), presided over by President Rajapaksa. Attention was focused on the ongoing power and energy crises. With Power Minister Gamini Lokuge out of the country, State Minister Duminda Dissanayake, who has been appointed as Acting Cabinet Minister, attended the Cabinet meeting. Minister Gammanpila continued to explain the dire power and energy crises faced by the country at present. He pointed to the financial crisis faced by the CPC and its overall impact on the country’s power sector as well as on the economy as a whole. Minister Dissanayake also joined in and explained that apart from the cash flow issues, the fuel crisis had added to the ongoing crises. He noted that if the Government was unable to provide $ 35 million by Tuesday (22), the country would face a dire fuel and power shortage. He added that there was an additional requirement of $ 26 million by tomorrow (28) to pay for a coal shipment that is due for power generation. Dissanayake noted that the CEB could generate power if there was a continuous supply of fuel while Gammanpila noted that the CPC could supply fuel if the required forex was released for shipments. However, after listening to Gammanpila and Dissanayake, Finance Minister Rajapaksa calmly said that despite many believing that the country would face many shortages including food commodities, it had not happened, and that the current crisis would also be resolved. Basil went on to say that the Finance Ministry would be able to allocate $ 35 million for the fuel shipment since the deal for the Hingurana sugar company would be finalised on Tuesday (22), bringing in $ 70 million to State coffers. The Minister explained that $ 35 million out of the said monies could be allocated to purchase fuel and the rest to make other essential payments. However, Gammanpila and Dissanayake asked how the Government planned to purchase fuel shipments afterwards and whether there was a plan to address the issue. Trade Minister Bandula Gunawardena also piped in saying that the country was pushing itself further into the debt crisis. President Rajapaksa then said that a special Cabinet meeting should be convened the following day, Tuesday, to discuss and address the power and energy crises. Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal was also asked to attend the special Cabinet meeting. The Cabinet again met last Tuesday (22) evening to discuss the growing power and energy crises. CBSL Governor Cabraal and Treasury Secretary Attygalle also participated in the special Cabinet meeting. Several ministers proposed that the CPC be permitted to increase prices of at least super diesel and super petrol. Finance Minister Rajapaksa objected to the proposal outright, saying there could not be any increase in fuel prices as it would have a cascading effect on the country’s economic activities. He said that instead the Finance Ministry would ensure that funds would be allocated to open the LCs for the delayed fuel shipments to ensure the availability of fuel and electricity for the week. However, Basil did not elaborate on a plan to address the issue next week when it is time to make the next fuel purchases. President Rajapaksa called on the Treasury to release funds to the CEB to pay its dues to the CPC. Accordingly, Rs. 80 billion was asked to be released to settle the CEB’s total dues to the CPC. Basil targets Udaya Amidst the discussion on the power and energy crises, Finance Minister Rajapaksa reignited the cold war that has been brewing between him and Energy Minister Gammanpila since last year. When the discussion focused on increasing local fuel prices, Basil, after vehemently opposing such an increase, decided to target Gammanpila over the operations of the CPC. Basil indicated that part of the CPC’s financial crisis was mostly due to the high expenditure incurred by the Corporation by way of recruitments. The Finance Minister told Cabinet that he had received a report on the CPC’s expenditure that indicated the institution was overstaffed and a high expenditure was being incurred on salaries. Gammanpila responded saying that he had carried out a separate study and after identifying the overstaffing at the Corporation, had taken measures to reduce 20% of the staff from the excess cadre. Basil, unwilling to accept Gammanpila’s response, stated that according to reports he had received, the CPC had continued with recruitments after the so-called retrenchment. Gammanpila countered that several key appointments had to be made as they were essential for the CPC’s operations. The President quickly intervened to ensure that the debate did not continue any further. Intensifying crisis The power and energy crises faced by the country hit a new high last week with the CPC unable to secure the required US Dollars to procure fuel shipments, resulting in a shortage of fuel island-wide. Many fuel stations in various parts of the country started to ration fuel at the pump. Apart from the rationing of fuel for transportation, the short supply of fuel directly impacted the country’s power generation capacity. The Kerawalapitiya Yugadanavi power plant and the Sapugaskanda A and B Power Plants last Sunday (20) stopped supplying 370 MW to the national grid due to the lack of fuel. The Yugadanavi Power Plant usually generates 270 MW while the Sapugaskanda A and B Power Plants generate 100 MW. CPC’s difficulties in securing fuel shipments were further compounded by CBSL Governor Cabraal issuing a special circular to banks regarding the provision of loans to the CPC. With local news reporting that the CBSL Governor had issued directives to banks not to issue loans to the CPC, Cabraal on Monday (21) clarified his position stating that the CBSL had only asked State banks to adhere to the Single Borrower Limit that had been set for the CPC. “Not banned loans to CPC as reported in some news media,” Cabraal added in a Twitter message. Nevertheless, Cabraal’s directive to the banks effectively resulted in the banks refusing to lend any more dollars to the CPC. Cabraal, since last year, had warned the State banking sector that the banks should be mindful when lending to the CPC in order to maintain the Single Borrower Limit. It is also learnt that Cabraal has further informed the Government that he would not take responsibility if the State banking system were to collapse due to the continuous financing of the CPC. The CEB meanwhile turned to raising funds in rupees in order to make payments for its fuel requirements from the CPC. The State-owned power utility turned to Lanka Electricity Company (Pvt.) Ltd. (LECO) for a loan. However, the CEB believes that the loan of Rs. 250 million provided by LECO to the cash-strapped CEB is unlikely to provide any significant relief, given the extent of the fuel crisis in the country. Meanwhile, the ongoing power and energy crises have also resulted in the Government issuing a circular aimed at conserving electricity and fuel in the State sector. The Power Ministry is geared to open bids for the emergency purchase of power tomorrow (28) through public advertisements placed by the CEB. The CEB is expected to submit the relevant proposal to the Power Ministry after finalising a private entity. In this backdrop, Energy Minister Gammanpila once again issued a red alert last week, saying the country may run out of fuel very soon, adding that the CPC did not have money to purchase oil. Speaking at an event in Kaduwela recently, the Minister said the crisis in the CPC was as a result of fuel being sold to the public at a concessionary rate. He said that fuel had been continuously sold at a much lesser rate to the public than the rate it was purchased from overseas. As a result, the CPC had had to incur losses over the years for the fuel it imported. He said the fuel crisis in Sri Lanka had reached a level where the public might be forced to leave their cars at home and travel by bicycle. Meanwhile, Minister Vasudeva Nanayakkara has said that with the current increasing international crude oil prices, the best way to manage the situation is by reducing petroleum usage by all possible means. The Minister has said that if fuel prices are increased in-line with the market prices, low-income owners of vehicles would be severely impacted. Therefore, he had suggested the control of fuel usage by supplying fuel for essential usage and implementing a methodology to restrict excessive usage by high fuel consumers by charging more. He said that by doing so, the Government could expect to reduce international fuel purchases and therefore conserve foreign reserves. Fuel stocks and power capacity Gammanpila informed Parliament last week that it was becoming increasingly challenging for the Government to allocate US Dollars for fuel shipments as it was difficult to make around $ 500 million payments monthly for fuel when the country’s export revenue stood at around $ 1 billion, with only 75% of the earnings actually entering the system. He noted that the Sapugaskanda Oil Refinery required 181,000 MT of crude oil to carry out operations at full capacity. The Minister also admitted to the shortage of diesel experienced in the country during the last week, saying that the CPC had issued only limited stocks to the market due to the difficulties in making the payment for the diesel shipment that had arrived the previous week. “The country does not have any shortages; it is only a shortage of dollars that has caused the problem,” he added. Gammanpila further reiterated that the CPC had not received permission to increase fuel prices, despite several requests. “The last price revision was on 20 December last year when an oil barrel was only $ 72. It has now increased to $ 100,” he highlighted. It is at this point that United National Party (UNP) Leader, former Prime Minister Ranil Wickremesinghe questioned Gammanpila on whether the Government could ensure a continuous supply of fuel to the country. He also said the Government should focus on making payments for spot purchases for fuel before it is affected by global price increases. Gammanpila once again pointed to the forex crisis faced by the country. Meanwhile, Opposition Leader Sajith Premadasa asked: “Does the Government accept that the country is in a serious crisis without fuel due to the lack of foreign exchange? If so, please tell the country and people the steps you expect to take without continuing your piecemeal (eda wela) tours.” He further noted that people had had to wait in queues for hours on end to buy a domestic gas cylinder even while gas cylinders were causing explosions in kitchens during the past few months, while they now had to line up in front of fuel stations to refuel their vehicles. However, last Thursday (24), Gammanpila claimed in Parliament that the CPC had managed to reduce its debt to State banks by about $ 355 million to $ 2,745 from $ 3,100 million. He added that diesel and furnace oil were being unloaded from their shipments at the time. As of Thursday (24), fuel stocks available in the country stood at petrol 92 for 10 days, petrol 95 for 40 days, diesel for eight days and super diesel for eight days. Gammanpila noted that the CPC had provided 6,000 MT of fuel for the CEB plants, 4,200 MT of fuel for the Sojitz Power Plant and 900 MT of furnace oil to the Sapugaskanda Plant on a daily basis. A 30,000 MT shipment of furnace oil is due to arrive this Thursday (3 March). Meanwhile, Acting Power Minister Dissanayake informed Parliament of the requirement of fuel for thermal power plants in the country – 300 MT for Sapugaskanda A, 300 MT for Sapugaskanda B, 650 MT (Naphtha) for Kelanitissa, and 1,400 MT (furnace oil) or 1,500 MT (diesel) for West Coast. Dissanayake informed Parliament that the ongoing drought conditions would result in the continuation of power cuts even for a shorter duration even if the thermal plants were supplied with fuel. Cabraal’s firm stand CBSL Governor Cabraal meanwhile in an interview with Bloomberg recently has insisted that the present exchange rate in Sri Lanka is fair. “I think the rate at which the Sri Lankan Rupee is trading today is a fair one. It provides opportunities for all stakeholders and I think that sometimes, although people look at it from certain angles and believe that the exchange rate should be different, we, from the Central Bank, take a holistic view and then as a result we are able to manage it at a reasonably good place so that people will be able to do all their transactions in a fair and a good manner so that we can go forward with greater confidence,” Cabraal has said. Cabraal has further noted that the Government would look at an increase in fuel prices. “I think that’s important for us to recognise and we are also making certain changes in our economy, particularly the fuel prices. Now there is an indication that the Government will be looking at an increase in fuel prices which is what the IMF also would have naturally come up and perhaps advised us to do,” he has added. President’s invite In a bid to resolve the economic challenges faced by the country, President Rajapaksa last Monday (21) invited local entrepreneurs to invest in local industries and join in the process of nation building. He made this invitation at a discussion held with large-scale entrepreneurs in various fields at the Presidential Secretariat, which was convened with the objective of obtaining the assistance of the private sector in the development process, the President’s Media Division said.  There were discussions on a number of areas including foreign exchange generation, State fiscal policy, foreign employment promotion, investment incentives, increasing exports, renewable energy, agricultural products, adequate supply of fertilisers, and tourism promotion. The President had said that large-scale investments in a number of sectors, including renewable energy, green agriculture, technology parks, and greenhouses, would open up a great opportunity to control foreign exchange. Finance Minister Rajapaksa had pointed out that the shortage of cement had arisen due to the increase in demand for cement with the revival in the construction sector during the past two years and that the Government was focusing on manufacturing cement in the country in the future. Pointing out that there was no shortage of essential commodities in the market, the Minister had urged the traders not to take undue advantage of the decision taken to remove some of the price controls except for medicinal drugs. CBSL Governor Cabraal had said that the Government would take steps to maintain fuel reserves in a manner that would not harm development and industries, despite the challenge of obtaining fuel on ready cash. Cabraal had said that the country was losing foreign investment opportunities due to false propaganda about its economy, adding that the Government had the ability to repay all foreign loans and would take steps to attract investments into the country. Cardinal calls for change The Fundamental Rights (FR) petition filed by former Director of the Criminal Investigations Department (CID) Shani Abeysekera and Archbishop of Colombo His Eminence Malcolm Cardinal Ranjith’s visit to the Vatican last week have propelled a new turn in the investigation into the 2019 Easter Sunday attacks. Cardinal Ranjith, who is currently on a visit to the Vatican, is also expected to hold a holy service for the Sri Lankan community in Italy and Europe, calling for justice for the victims of the Easter Sunday attacks. A few days after Abeysekera filed an FR that made startling revelations about the 2019 Easter Sunday attacks, the Government took measures to submit at least portions of all volumes, including the final report of the Presidential Commission of Inquiry (PCoI) into the Easter Sunday attacks and related witness records, to Parliament. The almost complete 88-volume report of the Presidential Commission of Inquiry was handed over to Speaker Mahinda Yapa Abeywardena by Presidential Secretariat Director-General of Legal Affairs Harigupta Rohanadeera on Tuesday (22). The final report of the PCoI into the Easter Sunday attacks was handed over to Parliament on 8 April 2021, but the witness records were not released due to legal reasons. This time Cabinet Spokesman Minister Ramesh Pathirana told the media that portions of the report were withheld for “national security” reasons. However, the recent acquittal of former Defence Secretary Hemasiri Fernando and former Inspector General of Police (IGP) Pujith Jayasundera from the Easter Sunday attacks case has gathered criticism and concern from the Catholic Church as well as the Anglican Church. The common question asked by them all is who will now be held responsible for the 2019 attacks. Expressing disappointment in the Government’s failure to provide justice to the Easter attacks victims and their families, the Catholic Church is now pushing for a change in power to ensure justice prevails. Cardinal Ranjith has claimed that the Catholic Church cannot believe that justice will be served for the victims of Easter Sunday terror attacks under the present Government or the Attorney General’s Department and that they would have to wait for justice to be served under a government that would come to power in the future. Cardinal Ranjith made these observations during an event in Colombo via video technology. “It is very clear that we cannot keep confidence in the current Government or the AG’s Department. Therefore, we have a feeling that we will have to wait and see if justice will be served for the Easter Sunday terror attacks even under a future government,” he said.  Cardinal Ranjith also said that although a group of Islamist extremists had been directly behind the said terror attacks, he had evidence of Intelligence and senior Police officials who were aware of the possibility of a terror attack. He further claimed that the Government and current Attorney General President’s Counsel Sanjay Rajaratnam were, however, concealing evidence with regard to such officials that was presented before the PCoI on the Easter Sunday terror attacks. “We have evidence that the Intelligence and senior Police officials were aware of the attack. This is clearly mentioned in the PCoI’s final report. Such evidence has now been hidden by this Government and the AG. We have sent letters requesting the relevant volumes of the PCoI’s report, but both the previous and current Governments have ignored our requests and taken steps to hide the evidence,” he claimed. Cardinal Ranjith further said: “The PCoI’s report clearly states that legal action should be taken against certain individuals, especially heads of State and high-ranking Intelligence and Police officials for not having prevented the terror attacks. However, that is not happening because of the misconduct of the AG and AG’s Department.” He also charged that the incumbent Government had not fulfilled any of its promises to ensure justice for the Easter Sunday terror victims and had instead promoted senior Intelligence and Police officials who did not prevent the bombings, adding that such acts of the Government had made the country’s law a joke. “Certain high-ranking Intelligence and Police officials who are responsible for not having prevented this terror attack have even been given promotions and the law has been ridiculed through it. I directly blame the present Government for that. Furthermore, the relevant agencies are said to have taken steps to prosecute some individuals who were indirectly involved in National Thowheeth Jama’ath (NTJ) Leader Mohamed Cassim Mohamed Zahran alias Zahran Hashim’s group, but we do not know whether those cases are being carried out properly,” Cardinal Ranjith added. NPP responds Meanwhile, Janatha Vimukthi Peramuna (JVP) and National People’s Power (NPP) Leader Anura Kumara Dissanayake has claimed that the Government had failed to implement law against the perpetrators of the Easter Sunday attacks and that perpetrators would be produced in Court and punished under a future NPP government. Dissanayake made this statement at the NPP Puttalam District Convention in response to Cardinal Ranjith’s recent statement. Dissanayake noted that Cardinal Ranjith had said that it was only under a new government that the law would be implemented against the culprits of the Easter Sunday attacks and pointed out that one of the priorities of a future NPP Government was to act against those involved in the Easter Sunday attacks. He said former IGP Jayasundera and former Defence Secretary Fernando, who were produced in Court for being unable to prevent the attacks, were acquitted of all charges and called on the incumbent Government to reveal the culprits. “It was the responsibility of the Government to find out real wrongdoers and produce them before the law. However, the Government has made some persons State witnesses, whereas their names were webbed in controversy for being negligent,” he noted. Dissanayake added that two factions, namely those who were unable to prevent the attacks and those who masterminded the attacks, should be identified and produced in Court.