Thursday, April 18, 2024

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Commercialization of SL fuel sector prompts the need of proper regulator

By: Staff Writer

Colombo (LNW): In the wake of the entry of three multinational oil companies into the fuel import, distribution and sales the need of a state regulator has become vital to achieve expected positive results several veteran economists claimed.

The Public Utility Commission (PUCSL) is empowered to regulate all 5 fuel suppliers. But on the other hand, the government is trying to weaken the PUCSL. There should be an open competition for fuel pricing, they said.

Cabinet approval granted to award licenses to Sinopec, United Petroleum, Australia and RM Parks of USA in a collaboration with Shell Plc to enter the Fuel Retail market in Sri Lanka. These companies will be allowed to import, store and distribute petroleum products for 20 years.

State minister for finance recently declared the amount of accumulated losses of SOEs including Ceylon Electricity Board (CEB) and Ceylon Petroleum Corporation (CPC) is Rs1029 billion.

But the truth is that the government has taken a large portion of money from the CPC (and to some extent from the CEB) as taxes.

The Government and the regulator should not allow energy cartels to be formed and black mail the government and country. This was evident during Mrs Bandaranaike’s tenure in 1961 which resulted in the nationalization of fuel companies, former Power and Energy Minister Patalee Champika Ranawake said.

If we liberalize the fuel markets, competition should prevail, and a powerful regulator must exist. If not it will be a disastrous experience than the current CPC, he added

The Government has decided to unbundle CEB as well. Independent cost unit/ components may be formed according to the committee report — six generation units, two transmission units, 4 distribution units and a few other units to run the CEB-owned assets and subsidiaries.

Most professionals agree that CEB should have four distribution companies similar to LECO (CEB subsidiary).

The problem is the consumer is restricted to one choice in his living area. Only one electricity supplier exists.

In the meantime, the ministry is to introduce the WHEEKING PRINCIPAL where a consumer can buy from a particular independent power producer by minimal understanding. So, it is a limited open market.

Power is of paramount importance in all economies. Destabilization in the power and energy sector will lead to political destabilization.

This was the case in Lebanon, Greece, Pakistan, and other countries in the recent past. I wrote a book, “Power and power” (2014) to coin the theory on the correlation between political power and physical power (energy), citing various experiences around the world and in particular Sri Lanka.

It has been observed that the political elite, criminal bureaucratic elements and power sector oligarchs work in unison and siphoned off big money from the Ceylon Petroleum Corporation (CPC), Ceylon Electricity Board (CEB) and finally from the consumers’ pockets.

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