Friday, February 23, 2024

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Govt opens international oil companies to operate in the country

The crisis-ridden Government is to allow international oil companies to operate fuel import and distribution in Sri Lanka ending the oligopoly of Ceylon Petroleum Corporation (CPC) and Lanka Indian Oil Company, a senior energy ministry official said.

This decision has been taken after a recent attempt of opening the fuel importation for six private companies did not materialise as the first such shipment ordered by a selected firm with a connection to foreign fuel supplier has failed to fulfill its obligation, he revealed.

The Energy Minister will present a Cabinet paper today to grant permission to international oil players like Shell , Caltex, Esso and other international companies to supply and distribute fuel for Local Ceypetco fule filling stations on credit basis for six months or one year obtaining necessary dollar funds from their parent companies, he added.

These companies will be given Ceypetco fuel storage and other logistic facilities for their local operations which will not be a burden for the Sri Lanka government. he disclosed,

The selected international companies will be given at least 200 each of Ceypetco fuel filling sheds numbering1190 countrywide.

” The selected company should supply fuel for at least for one year on credit––a company that could use its own funds to import fuel, ” he said, adding that the purpose will be lost if they too start tapping into the dollars of local banks.

He disclosed that Lanka IOC has made a request from the government to hand over atleast 50 Ceypetco fuel filling stations for them to expand their operations further to ease man –made fuel crisis.

The CPC is facing financial constraints including the cash flow, debts to banks and fuel suppliers along with dollar issues, a senior official of the energy ministry told the Business Times.

It has to settle US $725 million in overdue payments to suppliers and also struggling to open letters of credit in state banks for future shipments as the corporation is indebted further $ 355 to those banks. ,

Sri Lanka’s monthly fuel bill is around $ 311 million per month but it has increased to $ 700 million in April this year due to the payment of demurrages for shipments, middlemen’s transactions and spot purchasing.

This fuel bill could be easily maintained at $ 500 million per month by resorting to a term tender by awarding it in a proper procedure, several former CPC chairpersons said. .

The annual fuel import bill could be brought down to $ 4 billion by minimising irregularities, corruption and waste, he added.

The country’s export revenue has increased $15.72 billion in 2021 from $10.05 billion in 2020.

The export revenue in March 2022 was $ 1.057 and it came down to $ 915.3 million in April and again increased to $1.2 billion in May, Finance Ministry data showed.

Accordingly an assumption could be made that the country will be able to save at least $ 500 million per month even after making all import payments.

Foreign remittances have varied as the country received $205 million in February, $ 318 million in March, $ 248.1 million in April and 304.1 million in May 2022.

According to these data it is surprising that the country is struggling to find dollars to pay for emergency fuel imports as present foreign inflows were sufficient for this purpose.

The Governor of the Central Bank Dr. Nandalal Weerasinghe has agreed to pay the outstanding payments due to the relevant companies for the fuel supply with a plan.

President Gotabaya Rajapaksa instructed the officials to take immediate action to import fuel using the existing funds available until then.

The President made these remarks at a discussion with the representatives of the main companies that have been importing and supplying fuel to Sri Lanka for a long time, on Monday (27) at the President’s House in Colombo.

It was decided to provide funds from the Central Bank and the Ceylon Petroleum Corporation to restore the supply of fuel.

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