Mihin Lanka was created without cabinet approval

Colombo (News1st): The presidential commission investigating SriLankan Airlines, SriLankan catering and Mihin Lanka Pvt. Ltd. convened today (October 10). A revelation was made today that the government-owned budget airlines Mihin Lanka, was established on the 27th of October 2006, without a cabinet paper or cabinet approval. The witness stated that the cabinet paper regarding the establishment of the government-owned budget airline was principally established on the 1st of December 2006 and cabinet approval was granted on the 20th of December. According to its letter of incorporation Mihin Lanka was already established two months prior to cabinet approval. It was revealed by the witness that Mihin Lanka had  a total debt of nearly Rs. 159 million to LOLC and LOFC. Funds for the same value were issued by the treasury in the form of a rupee loan. It was revealed at the commission that these funds were used as a security deposit for aircraft instead of settling outstanding dues to LOLC and LOFC. Mihin Lanka’s debt obligations also included a total of nearly Rs. 139 million obtained from Lanka Puthra Development Bank. Concerns were raised at the commission, as to how a government bank that was formed in 2006, had sufficient financial capacity to provide Rs. 139 million. It was also revealed that Mihin Lanka had issued cumulative preference shares worth 300 million rupees to Lanka Puthra Development Bank, without the approval of the general treasury. The witness also stated that the dividend payable on these shares was estimated at 84.3 million rupees. However, a basis is yet to be established as to how Lankaputhra arrived at these figures. It was also revealed that loans estimated at 1.2 billion rupees were obtained from Bank of Ceylon. These loans incurred a total interest burden of 310 million rupees. It was also revealed that the bank of Ceylon, had agreed to waive off 137 million rupees along with penalty charges from its total due amount. It was stated by the chairman of the commission, that it was public funds utilized in such an inefficient manner. It was also revealed that in March 2007, a supplementary capital allocation of 250 million rupees was to be infused to Mihin Lanka, by the Department of National Budget. However, the witness revealed that this allocation was made to the presidential secretariat instead of the relevant line ministry. It was revealed by the witness, that since inception, no financial evaluations or cash flow statements were prepared or presented by Mihin Lanka, for the supervision of the public enterprise department or Ministry of Ports and Aviation. Further Mihin Lanka had not adopted any business module, had not managed its financial resources efficiently, failed to meet statuary requirements and caused heavy losses to the government and public funds.