Archives

By Ravi Ladduwahetty

The purchase of Lanka Marine Services Ltd, the former Ceylon Petroleum Corporation subsidiary operating a monopoly bunkering facility in the Colombo Port by John Keells Holdings Ltd, for Rs. 1.2 billion, is a further step in developing Sri Lanka as a premier regional transportation hub, JKH Main Board Director and Head of the Group's Transport and Infrastructure Sector Susantha Ratnayake told the Daily News in an interview.

Our primary aim is to raise the standards of efficiency and standards of the LMS facilities and operations in order to be able to compete in international marine fuel markets," he said.

We will make a complete review of the LMS pricing policy in order to reduce or eliminate distortion or anomalies that may be present in the current product pricing mechanism, he said.

The interview:

Q: As the Main Board Director of the Transport and Infrastructure sector, it must be fulfilling that the John Keells Holdings Group has made inroads into yet another cargo related investment consequent to the Group's 26.25 percent equity participation in South Asia Gateway Terminals (Pvt) Ltd, operators of the Queen Elizabeth Quay (QEQ). Your comments?

A: Yes. It is in line with the Group's vision of developing Sri Lanka as a premier transportation hub in the region. It is a vital component that needs to be developed alongside the emergence of the Colombo Port as a major transshipment hub.

Q: Given that there are three conglomerates - JKH, the Aitken Spence Group and the Hayleys Group have a substantial stake in the shipping and cargo handling business in Sri Lanka, why do you think that the other two, along with other blue chips in the cargo related business have not made relatively substantial investments into the cargo infrastructure?

A: Different Groups have different strategies and different criteria in evaluating investments and that is best answered by them.

Q: In that light, do you believe that the restriction in the ownership/holding of equity of companies related to shipping and shipping agency business to 40 percent was the phenomenon that restricted these investments?

A: In my opinion, that should not have a bearing on investments.

Q: What are your plans for Lanka Marine Services ?

A: Our primary aim is to raise the standards of efficiency and standards of the LMS facilities and operations in order to be able to compete in international marine fuel markets.

Q: It is said that Lanka Marine Services has 428 employees when the operations said to be conducted with around 100 employees. It is also said that of the employees, over 100 are security guards. What are you plans for the employees in the light of the Memorandum of Understanding that the Public Enterprises Reforms Commission wanted you to sign with the CPC unions when the privatisation agreement was signed?

A: PERC withdrew the condition of signing an MoU with the unions. We would have no problem in signing anything with the unions along with the lines of undertakings given to the CPC and the Government in any case, we intend to honour them. It is too early to say what the plans are and what the cadre should be.

Q: The strength of the John Keells Holdings Group is in operations and financial management. Coming to the operational aspects of LMS, will you be outsourcing the operations, given that the Group has no known experience in the management of oil installations and delivery barges?

A: You must understand that we have bought a going concern and a profitable one at that. This would not have been possible without expertise at LMS, even if they had to work within the constraints of a public corporation. We will work with the inhouse expertise at LMS in the short term while looking a other options. You might be surprised to hear that we have been approached by most of the Oil Majors, regional players and some oil companies that bid with the other local companies. This possibly shows the potential of LMS.

Q: All the bidders who expressed interest in the purchase of LMS were required to give a commitment to the Public Enterprise Reform Commission of investment into the rehabilitation of the oil tanks, a part of the prequalification process. There were other aspects such as the health and safety issues. Have the modalities been finalised with PERC in this regard?

A: Yes. This is included as appropriate in the agreements that were signed.

Q: What is your pricing policy, given that Sri Lanka's prices are said to be competitive in the eyes of the international shipping community and most shipping lines surpassing Sri Lanka?

A: We will make a complete review of the LMS pricing policy in order to reduce or eliminate distortion or anomalies that may be present in the current product pricing mechanism. We would also have to monitor the international market conditions and adjust the LMS pricing in order to remain competitive in the region.

Q: The Sri Lanka Ports Authority has called for Expressions of Interest for the rehabilitation of four oil tanks. The JKH Group has also submitted bids along with seven others. Do you feel that these operations will offer competition to the LMS operations ?

A: We have no problem in competition as long as it is healthy, as we have seen with other businesses of the JKH Group. We only hope that the bidding process will be transparent.

Q: You were one of the eight signatories to the Letter of Intent signed between the Government and South Asia Gateway Terminals (SAGT) for the development of the Queen Elizabeth Quay. You are one of the two JKH nominee Directors on the SAGT Board. Given the massive criticism against the project by the port trade unions and certain sections of the media, how do you see the progress of the project, operationally, financially and in terms of revenue to Government?

A: We are pleased with what we have achieved, given that this is the largest private sector project undertaken to date. We are on plan both operationally and financially and the revenue streams for the Government and the Sri Lanka Ports Authority (SLPA) as envisaged.

Q: Are you satisfied with the manner in which the PERC handled the privatisation of LMS where different messages were emitted all the time where the bidders were given an hour to pay the Rs. 1.2 billion after the mixed signals were sent on the MoU with the CPC unions where three of the five bidders were having foreign collaboration? Don't you think that these were the wrong signal sent at a time that the Government is crying for foreign investments?

A: You must understand that this is an enormous task to bring the different Government agencies together in a transaction such as this. I personally think that PERC handled it well in the circumstances. What PERC needs is more power to overcome the inconsistencies that arise among the different agencies. About the part of being given one hour, I don't agree as the meeting was called at the request of JKH.

Q: Another case in point, PERC Chairman Dr. P. B. Jayasundera originally told the five bidders/consortia that the floor price of Rs. 1.2 million for the prequalification could not be brought down as that amount had been approved by the Cabinet, despite protests that the bids were high. Then, he announced that the entire transaction was approved by Cabinet last Wednesday. How do you reconcile the two issues?

A: I am not in a position to comment on that. We went on the basis that we were paying a fair price. We would have liked to have it cheaper.

Q: Master Divers, another player in the field of bunkering is expected to start a process of establishing an off shore bunkering facility in Hambantota. Do you feel that this venture will offer competition for the LMS operation?

A: Offshore bunkering has been open for many years and LMS has still achieved what it has achieved. So, this is nothing new.

Q: As a frontline personality in the business sector and as a main board Director of the conglomerate with the largest market capitalisation, what are your comments about the peace process and investor sentiments especially in shipping infrastructure in that backdrop?

A: It is very positive and evident in every sector, as this has been the main constraint that we faced. We see real hope for the first time, as this has been well thought out very professionally with commitment.

News | Business | Features | Editorial | Security
Politics | World | Letters | Sports | Obituaries |

Produced by Lake House
Copyright 2001 The Associated Newspapers of Ceylon Ltd.
Comments and suggestions to :Web Manager