Lanka Sathosa retail outlets default dues of essential commodity suppliers

Sri Lanka’s loss-making state-run retail store chain Lanka Sathosa is defaulting its suppliers of essential commodities,.

A group of leading commodity suppliers has already informed in writing to the President and the Prime Minister that Lanka Sathosa is delaying their payments running up to millions of rupees accumulated in the past couple of years.

They are also contemplating legal action against Sathosa management for breaching supplier’s contracts.

The state-run retailer is now trying to sell more high-margin grocery items in order to be profitable without paying dues to its suppliers, they alleged.

It has to sell essential food items at cost which account for 60 percent of revenue an official of the Ministry of Industry and Commerce said.

There was  a mismatch that’s preventing us from becoming profitable, with high-margin goods accounting for around 40 percent of total revenue, he added.

Lanka Sathosa reported a 23 percent growth in revenue to 17 billion rupees during the first six months of 2018 from a year earlier, with un-audited profits somewhere around 45 million rupees, official data showed.

But even with some profits, the state-run retailer has defaulted commodity suppliers sending them from post to pillars.

Critics, including Sri Lanka’s Auditor General, have revealed that there is more to LakSathosa’s losses than simply selling goods below cost at tax-payer expense.

LakSathosa and the Co-operative Wholesale Establishment before that, had made chronic losses amid mismanagement and gone through repeated ‘restructuring’ and bailouts at people’s expense.

A Finance Ministry report in 2018 said there were stock losses of 2,331 billion rupees in 2016, and 1,845 billion rupees in 2017.