Amidst a plethora of reforms that have received mixed responses from the citizenry, the Government is taking the initiative to allow international players to enter Sri Lanka’s fuel market with high hopes of reviving this sector which remains among the top debt stricken State owned enterprises (SOEs).

As was reported earlier, the Government was considering the release of nearly 450 fuel stations to three international players, and now that the Cabinet of Ministers has granted its approval to this plan, licences would be awarded to China’s Sinopec, Australia’s United Petroleum and the United States’ (US) R.M. Parks Inc. to enter Sri Lanka’s fuel retail market in collaboration with Shell PLC. According to the Minister of Power and Energy Kanchana Wijesekera, the energy committee and the other relevant procurement committees had granted their approval and recommendation to award these licences to operate where they will each be allocated 150 dealer operated fuel stations, which are presently operated by the Ceylon Petroleum Corporation (CPC). Moreover, 50 fuel stations will be established at new locations by each of the three companies.

The initial plan is to issue the said licences for a duration of 20 years, to allow the selected firms to import, store, distribute and sell petroleum products. Therefore, as much as the Government’s plan, which is part of the overall ongoing SOEs reform process, shows promising signs for the country’s fuel market, it is a long-term and complex endeavour which requires several urgent and serious actions on the part of the Government to create a suitable environment for this initiative.

One of the biggest concerns that need to be addressed immediately is the issue of Sri Lanka not having a regulator for fuel. Despite the fact that fuel is one of the key commodities, thus far, decisions pertaining to the fuel market are taken by the subject Ministry and/or the Minister. Due to that situation, on many occasions, concerns were raised as to how scientific and politically motivated these decisions are. This situation was also at the centre of the disputes between the present Energy Ministry and Minister and the Public Utilities Commission of Sri Lanka (PUCSL) Chairman Janaka Ratnayake which erupted when the latter did not reduce fuel prices despite having ample room to do so. In a context where dealing with foreign firms is a matter that directly and greatly involves proper regulatory frameworks, applicable laws and policies, profits and transparency, this situation needs to be addressed if the Government is to proceed with its plan. It could either bring the fuel sector under the purview of the PUCSL, or set up a brand new regulatory authority specifically for the fuel sector.

For this, there needs to be a significant level of transparency, accountability, honesty and support from the political authority as well. This commitment involves the Government changing its way of getting the utility service provider’s service. This is a pressing concern, because thus far, the fuel sector was expected and directed to provide massive, unsustainable reliefs for an extended period of time, which is one of the major reasons that resulted in the CPC being a debt laden SOE, and until recently, a loss making SOE. The Government must understand that international firms are not entering the local fuel market to suffer losses, or to provide reliefs. While any potential financial benefits to consumers after the said plan materialises are welcome, the Government must not expect or require these firms to follow in the CPC’s footsteps. This initiative should be a support, not a burden, to the country’s long-term energy targets.

The above mentioned companies were allowed to enter Sri Lanka’s fuel market because the country realised, although only after suffering unbearable losses, that something in the fuel sector needs to change for the better. Bearing that in mind, the Government must take the full advantage of the trust that the three said firms have kept in Sri Lanka, and keep politics, personal interests, corruption and short-term advantages out of its dealings with these firms.