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Covid takes CPC to profitability

08 Nov 2020

  • Pumping less, losing less 
  • Rs. 830 m net profit from Jan-Sept
By Madhusha Thavapalakumar The seven-week islandwide lockdown necessitated by the local outbreak of Covid-19 has transformed the Ceylon Petroleum Corporation (CPC) into a profit-making, state-owned enterprise for the first time in years. CPC has managed to record a net profit of Rs. 830 million in the first three quarters of this year, following a loss of Rs. 9 billion in the same period last year, according to CPC Deputy General Manager – Finance Varuna Nilanga Weerasooriya.  Weerasooriya told The Sunday Morning Business that this was mainly due to less fuel pumping during the corresponding period this year coupled with a tax on fuel prices. Restricted travel during the lockdown period and less movement around the country, even after the removal of the lockdown, made CPC cater to a reduced demand at its current price point, the profit component of which is a question.  “When a profit-making business sells more and more products, it brings them more profit. But when a loss-making business sells more products, it creates more losses. In our case, we have been pumping less, so our losses came down and turned into a net profit in fact,” Weerasooriya added.  Speaking to The Sunday Morning Business following the initial lockdown, CPC Chairman Sumith Wijesinghe stated that only 10-15% of a normal day’s requirement was being discharged from their refineries during the curfew days.  “Usually, we send out about 2,300 metric tonnes of petrol and 4,300 metric tonnes of diesel per day throughout the island. It has now been slashed to 150 metric tonnes of petrol and 500 metric tonnes of diesel,” he noted at that point.  Furthermore, aviation fuel supply at this stage was slashed by over 80% with just 200-250 metric tonnes of aviation fuel being discharged on a curfew day, as opposed to 1,200 metric tonnes of aviation fuel on a usual day. As a result, Sri Lanka had ample stocks of petroleum, both in the Muthurajawela and Kolonnawa refineries, to supply motorists for weeks.  The net profit was also supported by the tax introduced by then Minister of Power and Energy Mahinda Amaraweera in March this year. The import duty has been increased to prevent excessive profits being made by Indian oil giant Lanka Indian Oil Corporation (LIOC), which had, until recently, resulted in a massive loss of foreign reserves to the country. Since the Government could not slash the tax only on LIOC, it was applied to CPC also.  The reason behind the increased tax was that while the global oil prices were hitting their lowest rates in decades, oil prices in the country were being maintained at their current rates. Therefore, the Government was taxing the additional profit importers were making. According to Co-Cabinet Spokesman Dr. Bandula Gunawardena, Sri Lanka built a Rs. 200 billion fuel price stability fund which will be used to repay the outstanding debt of CPC and the Ceylon Electricity Board (CEB). The increase in tax came after wide criticism from political parties that the Government was allowing LIOC to completely take away the profits enjoyed due to the massive drop in global oil prices. Global oil prices have been on a declining trend amidst the coronavirus (Covid-19) pandemic, and it spread in over 195 countries. The Singapore Platts price of a barrel of petrol and a barrel of diesel started to decline since January, and have reached below $ 20 for the first time in decades; otherwise it is at $ 60, mostly. However, Sri Lanka President Gotabaya Rajapaksa took a firm stance that fuel prices would not be reduced as the benefit would be passed on to the consumers through other concessions such as reduced prices of canned fish and dhal.


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