China has declared that China Petroleum and Chemical Corporation (SINOPEC) will not proceed with the USD 3.7 bn Hambantota oil refinery project unless a consensus could be reached on the percentage of the output that could be sold in the local market.

China has informed the NPP government that SINOPECwill not be able to sustain the project in terms of the original agreement that stipulated that 80% of the output be exported and 20 % sold in the Sri Lankan market, according to sources familiar with the issue.

Once fully operational, the strategic facility will be able to process 200,000 barrels of crude oil a day. The proposed facility, together with the Hambantota International port, which was taken over by China in 2017 on a 99-year lease, emphasise significant Chinese presence in the country.

SINOPEC with about 12% market share is among the foreign companies engaged in fuel distribution in Sri Lanka at the moment. Other foreign players are Lanka India Oil Company (LIOC) and joint venture by Shell Brands International AG (Shell) and RM Parks (Private) Limited, the latter being the latest entrant.

LIOC entered the market way back in 2003 during Ranil Wickremesinghe’s tenure as the Prime Minister. LIOC holds the second biggest market share with 211 fuel stations with SINOPEC being third and joint Shell Brands International AG (Shell) and RM Parks (Private) Limited in fourth place. CPC remains the market leader with some 800 odd fuel stations countrywide.

Sources said that whatever the Chinese and Sri Lankan government representatives said in public the launch of the project primarily would depend on a new formula. The Island learns that the Chinese expect to sell 30% of the output here. “The Chinese are of the view that 20% share is not sufficient to sustain the project,” sources said.

Sri Lanka and China in January 2025 announced plans for the SINOPEC project dubbed the largest single Chinese direct investment here following President Anura Kumara Dissanayake’s three-day state visit to Beijing. Dissanayake’s delegation included Minister of Foreign Affairs, Employment and Tourism Vijitha Herath, Minister of Transport, Highways, Ports and Civil Aviation Bimal Rathnayake, and Sri Lankan Ambassador to China, Majintha Jayesinghe. Outspoken Chinese Ambassador to Sri Lanka Qi Zhenhong was also present at all key meetings with representatives of China Petrochemical Corporation (SINOPEC Group), China Communications Construction Company Ltd (CCCC), China Merchants Group (CMG), Huawei, and BYD Auto, a leading company in the automobile manufacturing sector.

Pointing out that Sri Lanka and China hadn’t been able to resolve the knotty problem for about 15 months, sources said that Sri Lanka was also under pressure from India to expedite the Trincomalee oil tank farm development project. Sri Lanka finalized an agreement with India and United Arab Emirates (UAE) in early April 2025 to develop Trincomalee as an energy hub.

Sources said that in line with the overall plans involving China as well as India-UAE, Sri Lanka was required to enhance the fuel storage facilities as soon as possible. The ongoing West Asia conflict underscored the responsibility on the part of the incumbent dispensation to take tangible measures to enhance storage facilities.

The Trincomalee and Hambantota projects could be on a collision course, sources said. The likelihood of Indo-Lanka agreements in respect of WW two era oil tank farms in Trincomalee, particularly the one negotiated during Gotabaya Rajapaksa’s presidency having animpact on the Hambantota oil refinery couldn’t be ruled out, sources said.

President Dissanayake during his May Day address disclosed the crisis faced by his government in ensuring uninterrupted oil supplies. Dissanayake said that the government had no option but to increase fuel quotas given to various categories in view of the arrival of fuel ships in Colombo as Sri Lanka lacked storage facilities.

Sources said that energy insecurity was at stake due to the continuing instability in the global markets caused by US actions in Hormuz Strait.

Newly-appointed Energy Minister Anura Karunathilake is believed to be engaged in consultations with relevant parties. Earlier Punyakumara Dissanayake who resigned recently over the coal scam handled the Hambantota refinery matter.

by Shamindra Ferdinando

The Sri Lanka Association of Divisional Secretaries and Assistant Divisional Secretaries (SLADA) has written to the Secretary to the President requesting the withdrawal of a decision to appoint “Clean Sri Lanka” coordinators at provincial, district and divisional levels, warning that it could seriously undermine the independence of the public service.

In a letter, signed by SLADA President R. Senthil and Secretary R. M. Nuwan C. Hemakumara, the Association has referred to a directive issued by the Secretary to the President, dated March 20, 2026, instructing District Secretaries to appoint coordinators for the programme and to provide them with facilities within Divisional Secretariat offices.

The Association has noted that Sri Lanka already has a long-established administrative framework to ensure effective public service delivery, spanning ministries, departments, provincial councils, district and divisional secretariats down to Grama Niladhari divisions. This system is supported by internal audit units, the National Audit Office, and coordination committees at divisional, district and national levels, which oversee and review programme implementation.

The SLADA has acknowledged that specific officers have already been assigned at divisional level to implement activities under the government’s Clean Sri Lanka initiative, which is being monitored

through existing community development committees and coordination mechanisms.

The association has expressed concern over the appointment of separate coordinators at district and divisional levels and the instruction to allocate office space and attach public officials to support them. It has argued that divisional secretariats are neutral public service institutions that provide services to all citizens without political, religious or ethnic bias, and that their independence must be safeguarded.

While acknowledging some isolated instances of politically influenced conduct by a small number of officials, SLADA stressed that the overall administrative structure has functioned as an independent and depoliticised system that has earned public trust.

The association further pointed out that the current government’s policy framework emphasises efficient and impartial public service delivery without interference in the independence of state institutions.

It has warned that appointing politically connected coordinators within divisional secretariats and attaching government-paid officials to them could seriously compromise administrative neutrality and may also raise legal concerns.

SLADA said previous attempts to introduce similar arrangements had been resisted, adding that the current system already allows for effective coordination, monitoring and review of government programmes, including Clean Sri Lanka.

Accordingly, the Association urged the President’s Secretary to revoke the decision and allow existing administrative mechanisms to handle programme implementation. It warned that any such precedent could have long-term adverse implications for the independence of the public service, and expressed hope for a reconsideration of the directive, stating that it would not cooperate with the current arrangement unless the request is addressed.

The Ministry of Finance, Planning and Economic Development has issued a Gazette notification, detailing amendments to the Value Added Tax (VAT) system, which are scheduled to come into effect from July 1, 2026.

According to the new provisions, VAT will be imposed on services provided through electronic platforms with effect from the implementation date, bringing digital services within the tax net under the revised framework.

The amendments also introduce a reduction in the threshold for VAT registration under Section 10 of the principal Act. Under the revised rule, any person who supplies taxable goods or services, or a combination of both, within Sri Lanka, exceeding a total value of Rs. 9 million during a taxable period, will be required to register for VAT.

In addition, the VAT rate applicable to financial services will be increased from 18 percent to 20.5 percent.

The new regulations further provide for the formal registration and payment of VAT on digital services, marking a significant expansion of the tax base to cover online and electronic service providers operating in the country.