Sri Lanka’s latest sale of mineral sands mainly ilmenite in a flawed tender process conceals more than it reveals depriving the state of millions of rupees in revenue benefiting middlemen and racketeers, according to an Industries Ministry probe. Lanka Mineral Sands Ltd (LMSL) had called for bids from prospective foreign and local bidders for the [...]

Business Times

Sri Lanka Ilmenite tender flaws expose corruption and fraud

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Sri Lanka’s latest sale of mineral sands mainly ilmenite in a flawed tender process conceals more than it reveals depriving the state of millions of rupees in revenue benefiting middlemen and racketeers, according to an Industries Ministry probe.

Lanka Mineral Sands Ltd (LMSL) had called for bids from prospective foreign and local bidders for the sale of heavy mineral sands including ilmenite with a security bond of Rs. 57 million or US$ 306000 in June last year .

Whilst the global best practice for any tender is to receive bank guarantees as bid bonds from registered suppliers, this state-owned company was in the practice of requesting cash bid bonds from the bidders. This created a firm entry barrier for credible foreign buyers since the process to remit cash for a tender and then to take it back if they fail to win the tender is very tedious, time consuming and LMSL has made it a habit in the past to delay any refund, a senior ministry official said.

This practice being carried out for many years, effectively entertains a few favourite bidders of some corrupt officials, industry sources alleged.

They noted that top foreign companies will never apply for such tenders and this move of the LMSL has neither benefitted the government nor the company during the past several years.

The bids for the sale of heavy minerals including ilmenite were being called in the latter part of every year to coincide with the Chinese New Year, an industry official said, adding that during this period the ilmenite price will go down due to less demand.

At the time of calling bids for the sale of ilmenite the price was around$145-$147per ton.

LMSL has awarded the tender of 85,000 metric tons ilmenite at $147 per ton to the third-placed bidder rejecting the prospective bidder who had quoted the highest price of $165 per ton, a COPE report revealed recently.

It was also revealed that the current price of a metric ton of ilmenite is close to $260. The committee focused its attention on the decline in sales in 2020 compared to the total sales in 2018 and 2019.

According to official calculations, the real loss for the state is over $8 million, the reason being, if not for the malpractices and bad governance, the tender should have been called after the Chinese new year and any credible buyer would have bought the entire lot for over $ 260 per ton.

It was revealed that as a result of still storing the 85,000 metric tons of ilmenite sold to a buyer in October 2020 in the Pulmoddai deposit, the company is incurring losses due to minimising the space available for the institution to store further minerals.

Payments had been made only for 65,000 metric tons from this stock and payment for another 20,000 metric tons is to be recovered.

COPE Chairman Prof. Charitha Herath directed the Secretary to the Ministry of Industry, Anusha Palpita, to inquire into the matter immediately and submit a report within a month.

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