Great brains of Mahinda and his JHU, JNP GOSL (bunch of criminals) will cost (losses) millions of USD for nothing every month....The same fate and losses to be realized in wanni very soon so that mahinda moda gang will have foot in mouth...sin aney
Sunday Leader 23/11/2008
Interestingly, Education Minister Susil Premajayanth who had earlier discussed the day's agenda with the President came fully prepared, newspaper cuttings et al, to not only take to task CPC Chairman Asantha De Mel but also the Standard Chartered Bank over the hedging operation and the precarious position the government has been placed in as a consequence.
Basically, what the government had committed to with the banks through the CPC and the Central Bank was that if the price of oil goes over, say, US$140 per barrel, then the corporation can continue to buy 100,000 barrels of oil per month at US$140 for three months with the banks providing the hedge taking the loss.
Therefore if a barrel of oil for example went up to $145, then the hedging bank would take a loss of $5 per barrel for 300,000 barrels.
At the same time, the government also committed to buy 200,000 barrels of oil per month at US $100 per barrel for one whole year if the price went below US$100.
Therefore if the price of a barrel of oil drops to US$55, it still has to pay at US $100 per barrel for 200,000 barrels every month.
That necessarily means taking a loss of US$45 per barrel and with the commitment being for 200,000 barrels every month for a whole year, a loss of US$9 million every month.
That in rough terms was the government's commitment with the estimated loss expected to be around US$300 million.
In essence the government had negotiated a very bad deal with the banks and with payments due every month due to the price of a barrel of oil falling well below US$ 100, the state was well and truly up the creek without a paddle and that was the issue before Cabinet.
Edited By - PULI0007 - 23 Nov 2008 01:41:35 GMT