Government is now forced to introduce a quota system for essential imports and a coupon scheme for consumers in buying food and fuel, reliable high official sources divulged.
Leading policy makers of the government are now considering the option of implementing a quota-based importation system to save US$ 3 billion expected to flow into the country soon, a top official said.
Since the beginning of the year both the Central Bank and the Government have been actively pursuing possible avenues to replenish official reserves, with an emphasis on encouraging non-debt flows, so that the existing foreign debt could be managed in a sustainable manner.
As an immediate action to conserve fuel which is being imported on spot purchasing system amidst dollar crisis and rising international petroleum product prices, the government is contemplating a fuel price hike or the issuance of fuel on coupon system.
This emergency action has become inevitable owing to the massive increase in debt and interest to be paid by the Ceylon Petroleum Corporation (CPC) amounting to Rs. 515 billion up to now, CPC sources said.
This amount is inclusive of debt installment and interest payment for the Bank of Ceylon and Peoples Bank in spite of the monthly loss of the CPC amounting to Rs.6.7 billion and its monthly income of Rs.61 billion.
Under this set up the Corporation is incurring loss of Rs33 from the selling of liter of Diesel RS 5 per liter of Petrol due to the oil price hike in international market.
Despite the huge increase in fuel prices in the world market, the government has managed to hold the current fuel prices without revising them for the last six months.
Unfortunately, the government can no longer keep prices stable, the energy ministry said, adding that there has never been a time in history when prices in the world market have not been revised for such a long time.
A loss of Rs. 331 billion will be incurred by the Ceylon Petroleum Corporation (CPC) by the end of 2021 due to the continuous purchase of fuel at higher prices with low sales at lower prices, the ministry revealed.
According to insight investigation, the CPC has been operationally profitable in the past. However, the recorded accumulated losses can be entirely attributed to poor treasury and financial management, which is reflected in interest costs, and large exchange rate losses.
Data from the Ministry of Finance show that the CPC made gross profits every year since 2013. That is, the revenue exceeded the cost of sales including taxes.
Over the last 10 years, the CPC recorded a gross profit of Rs. 281 billion. Therefore, the CPC’s losses cannot be attributed to selling fuel at a price lower than its cost plus tax, a financial analyst said.
Even when including operational costs related to sales and distribution, administration, and depreciation, the CPC still made profits in most years.
The accumulated operational profit amounted to Rs. 29 billion over the last 10 years (2011–2020). Therefore, the substantial accumulated losses cannot be explained by the addition of operational overheads, nor by capital depreciation costs, he claimed.
