Huge increase in sales volumes disastrous for Ceypetco – CPC chairman

By Shamindra Ferdinando

Ceylon Petroleum Corporation (CPC) Chairman Sumith Wijesinghe says Lanka IOC has increased its fuel prices by Rs. 5 a litre to curtail its losses by making its customers obtain fuel from Ceypetco fuel stations.

Wijesinghe said so when The Island sought an explanation as regards the mechanism in place to revise fuel prices and whether Lanka IOC required the government permission to do so. Wijesinghe emphasised that Lanka IOC move was calculated to discourage customers coming to its fuel stations thereby would sharply increase financial losses on the state enterprise as its fuel was highly subsidised to protect the local consumer.

“In other words, the surge in sales volumes will automatically increase losses. The same result can be achieved by increasing petrol and diesel by just two rupees, each,” Wijesinghe said.

Responding to another query, Wijesinghe pointed out that Lanka IOC clearly sought to cut down on their losses by forcing its regular customers to visit Ceypetco fuel stations. The outspoken official said that as their competitor is on record as having said that they suffered a loss of Rs. 20 and Rs.40 per ltr, on the sale of petrol and diesel, respectively, Lanka IOC strategy was clear.

Lanka IOC is a subsidiary of Indian Oil Corporation which comes under the purview of Ministry of Petroleum and Natural Gas, is the only private party that operates fuel stations here.

CPC Chief said as a result of increased volume of sales their stocks would be depleted much faster. Wijesinghe described the situation as ‘grave’ and quite a concern to cash-strapped loss making public sector enterprise.

According to him, the problem was much worse than the public realised. The Indian strategy would cause a catastrophic situation, Wijesinghe said.

Wijesinghe admitted that Lanka IOC didn’t require Energy Ministry consent to revise fuel prices. The enterprise that entered the Sri Lankan market during Ranil Wickremesinghe’s premiership in 2003 is the eighth largest listed company here.

The official stressed that urgent revision of fuel prices was a dire necessity as the overall financial situation remained precarious. Ceypetco’s network of fuel stations is much larger than Lanka IOC’s.

Lanka IOC in a statement issued Thursday night said that the selling price of petrol and diesel here remained significantly low as compared to the prices prevailing in the neighboring countries. “The prices of petrol and diesel need to be in line with the prices prevailing in the international market,” the company said in a statement e-mailed to The Island.

Lanka IOC refrained from revising the prices of Lanka Super Diesel and LP 95. The previous price revision took place on June 12.

Asked whether Ceypetco would match the Lanka IOC’s price increase immediately to counter the competitor’s strategy, CPC Chairman said that the issue at hand required a thorough examination of the full picture as they couldn’t contain the rapid deterioration of the finances unless a substantial increase was implemented.

Claiming the mounting losses were unbearable, Managing Director LIOC Manoj Gupta said that the company had increased the prices to the barest minimum. Responding to The Island queries, Gupta said that Lanka IOC didn’t require GoSL approval to revise fuel prices. According to the Indian official, Lanka IOC had been empowered by ‘virtues of previously signed agreements with GOSL to take independent commercial decisions.“

As at Oct. 21 the international price of Gasoil 500ppm was at $ 95.62/barrel and Gasoline92 $ 99.37/barrel.

The last price revision took place on June 12, 2021. However, since then the Brent crude oil prices have increased from $72/barrel to $86/barrel in the international market.

Energy Minister Udaya Gammanpila on Oct. 15 revealed that when raised the possibility of Treasury assistance to the CPC with Finance Minister Basil Rajapaksa, he was told in no uncertain terms the Finance Ministry was not in a position to do so.

In the wake of simmering controversy over the fuel price hike announced by Minister Gammanpila on June 12 with General Secretary of the SLPP attorney-at-law Sagara Kariyawasam demanding the minister’s resignation, the latter declared that the revision of fuel prices was the prerogative of the Finance Minister.

Attorney-at-law Gammanpila explained that in his capacity as the Energy Minister, he only made the announcement of a decision taken at a meeting attended by both President Gotabaya Rajapaksa and Premier Mahinda Rajapaksa.

Asked by The Island yesterday (22) afternoon whether the Ceypetco would match Lanka IOC price hike immediately, Minister Gammanpila said ‘No.’

In terms of the 2003 agreement with the UNP government, Lanka IOC has the strategically located China Bay oil tank farm, the largest such facility situated between the Middle East and Singapore. The tank farm, formerly owned and operated by CPC, has 99 tanks, each with a capacity of 12,000 litres. Of them, only 15 of these tanks are operational at the moment.

Commenting on the ongoing talks with about half a dozen countries to ensure uninterrupted fuel supplies, the Pivithuru Hela Urumaya (PHU) leader Gammanpila said that the cabinet of ministers recently approved a proposal to obtain USD 3.6 billion loan from Oman to repay in 20 years with a five-year grace period. According to him, the Omani offer had been undoubtedly the best and the government was going ahead with it. The offer now before the cabinet of ministers would give the government an opportunity to use USD 500 mn overdraft to order refined products from India.

Minister Gammanpila said that there had been other offers from China, UAE and Singapore though at the moment they were committed to Omani and Indian proposals.

Asked to explain the Indian offer, Minister Gammanpila said that USD 500 overdraft could be obtained with 4 percent interest payable in one year.

“Once settled, we’ll be eligible for USD 500 mn overdraft again.”