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Opening the fuel market: Over 40 private companies express interest

14 Aug 2022

  • New players to fund their own operations and keep revenue in SL for up to a year
By Skandha Gunasekara With over 40 private companies expressing interest in entering Sri Lanka’s fuel market, the Government hopes to ensure sustained supply to the market while increasing State income through fees levied on the new players.  Approximately 90% of Sri Lanka’s fuel demand is supplied by the Ceylon Petroleum Corporation (CPC), while the remaining 10% is supplied by Lanka Indian Oil Company (LIOC), the local subsidiary of Indian Oil Corporation (IOC). However, foreign suppliers registered with the CPC have stopped engaging in tenders as the CPC owes them large sums of money for past supplies which are yet to be settled. The CPC has to settle an estimated $ 725 million in overdue payments to suppliers while the State-Owned Enterprise (SOE) is also struggling to open Letters of Credit (LCs) in State banks for future shipments of fuel as a result of an additional $ 355 million owed to various banks. Greenlight to open market As such, on 18 June the Cabinet of Ministers gave the greenlight to open up the fuel import and retail sales market to companies from oil-producing countries.  Ministry of Power and Energy Secretary M.P.D.U.K. Mapa Pathirana told The Sunday Morning that new companies entering the market must use their own finances to fund their local operations and that any revenue could be reinvested but not repatriated for at least a period of one year. “When other players come in, they will have to use their own funds and resources and not the Government’s resources. For at least one year they will have to use their own funds. Whatever revenue they earn can be reinvested in their Sri Lankan operations or they can repatriate those funds only after a period of one or two years,” Pathirana explained. He said they would initially be able to use the facilities of the CPC and the Ceylon Petroleum Storage Terminals Ltd. (CPSTL) for a fee and that the companies could expand their ventures using their own funds with the approval of the Sri Lankan Government.  CPC losses When asked whether the CPC would incur additional losses even with these companies in operation, like it is experiencing at present when compared to LIOC, Pathirana said that these were losses from previous years being carried forward.  “The current losses of the CPC are actually losses carried forward from the previous years because they were selling the product at a lower price than the cost incurred. They are all carried-forward losses. In addition, it has had to give furnace oil for power generation, so the CPC has to borrow from banks and then procure and lend to the Ceylon Electricity Board (CEB). Further, the CEB and the independent power plants have not paid back monies to the CPC for furnace oil they have got on credit, so there is a massive outstanding amount on that too.” He added that the State hoped to regain some of the profits once the new private companies began paying fees for facility usage and through the continued operation of the Sapugaskanda Refinery.  Shortlisting soon Pathirana said that some 40 companies, with some recognised names in the mix, had shown interest and would soon be shortlisted.  “We have called for the Expression of Interest (EOI) and more than 40 companies have expressed their willingness to enter the market and accordingly they will submit their proposals. After that we will make a shortlist. Then we will call on those shortlisted to submit their Requests For Proposal (RFPs). Only then will we select two or three companies depending on their capabilities. There are quite a few prominent companies that have come forward, but I cannot reveal names as it will be unfair to the other companies.”  He said the foreign exchange shortage was the key reason for the Government’s decision to liberalise the fuel market.  LIOC ready for competition Meanwhile, LIOC Managing Director Manoj Gupta said the company was ready for any future competition. “We are aware of the possible competition. We have been doing our best and we will always continue to strive to improve ourselves in terms of our services. Times will be more challenging and we need to be very strong in terms of the behaviour of the attendants at the sheds, customer services, and other services which we can offer at our sheds. Competition always leads to improvements of a varied nature.” He also said that a fuel price reduction could be expected in the coming week: “There is already a price formula in place and the prices are being revised on a fortnightly basis, so we can look forward to a revision happening again somewhere around 16 August or so. With the way the market is behaving, it seems like the next revision will be a reduction. Let’s see.” He added that the LIOC would do its utmost to ensure the best customer services at the new fuel stations they planned to open following the Sri Lankan Government granting LIOC permission to set up 50 additional fuel sheds in the country.  “We are one of the private players in Sri Lanka and already we have been given the opportunity to open 50 new sheds by the Government, so we will make our best effort to provide the best level of comfort and services for our valued customers.”  


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