Business
Corporate sector offers policymakers a blueprint for CPC reform
by Sanath Nanayakkare
A blueprint of opportunities, challenges and the road ahead for the loss-making Ceylon Petroleum Corporation (CPC) was unveiled by JAAR Corporate Solutions at Taj Samudra Colombo last week.
Furthermore, JAAR offered potential public-private partnership (PPP) models for the financially-battered CPC to make a turnaround.
The participating policymakers, professionals, investors, economists and other individuals well-aware of the key reforms necessary for the debt-laden CPC discussed the reasons why Lanka Indian Oil Company (LIOC), which is the only competitor in the fuel retail market in Sri Lanka, has almost continuously made profit since its incorporation in Sri Lanka while the financial position of CPC has been a grave concern for its stakeholders.
The blueprint heralded by Dr. Janaka Fernando and Andreas Hergenröther was presented to Power and Energy Minister Kanchana Wijesekera, SJB MP Dr. Harsha de Silva and a number of high-profile individuals, for open discussion at the forum.
Both politicians made comments in favour of privatizing the CPC while ensuring quality of service, pricing accountability and distribution of fuel without disruption.
The discussion mainly centred on financials of CPC for the last 10 years, its products and services portfolio, the market structure, employment, social benefits, key performance indicators (KPIs), a comparison of Lanka Indian Oil Company (LIOC) and CPC using general figures, main contributors of losses, proposals for a suitable PPP models for potential investors and policy recommendations for the government of Sri Lanka.
A few observations made by Dr. Janaka Fernando and Andreas are as follows:
“The CPC provides a substantial source of income and expenses for the government being one of the largest SOEs. However, the CPC has become a heavy burden for the government and the Sri Lankan economy due to its poor performance. The total debt of CPC has been increasing at an alarming rate over the last few years.”
“The CPC’s debt amount, which was Rs. 529 billion at the end of 2020, increased to Rs. 561.3 billion by the end of 2021, and the amount has further increased to Rs. 700 billion by July 2022, which is the highest level of debt for an SOE in Sri Lanka. Meanwhile, the CPC accounted for 37.3% of public guaranteed debt stock of SOEs in Sri Lanka. In addition, the cumulative net loss of the CPC at the end of 2019 was Rs. 337 billion. This will further increase with the Rs.82.2 billion net loss incurred in 2021 and likely to increase further in 2022, according to CBSL 2021.”
“In contrast, LIOC, which is the only competitor in the fuel retail market in Sri Lanka, has continuously made profit since its incorporation in Sri Lanka, except for a few years. LIOC recorded Rs. 998 million profit-before-tax for the year ended by March 2021 together with positive retail earnings of Rs. 12.3 billion as of the end of March 2021.”
“Many countries around the world are increasingly relying on the private sector to invest in infrastructure services. PPP is not an unfamiliar concept in the petroleum industry in Sri Lanka. The petroleum market, which was nationalized in 1961, has experienced seven successful PPPs since early 1990s. However, before identifying potential PPP models for CPC, it is necessary to understand the scope of CPC in Sri Lanka’s petroleum distribution process. There are various forms of PPP models available, and the selection of a suitable method depends on the nature of the particular SOE and the project under consideration.”
JAAR Corporate Solutions made following policy recommendations to the government, for CPC to achieve and maintain a robust performance:
a. Discuss openly with all stakeholders such as government, trade unions and potential investors about sector-related PPP models and privatization.
b. Evaluate and reduce subsidies
c. Minimize currency risk
d. Increase liquidity
e. Introduce a transparent pricing mechanism that covers all costs
f. Breaking the monopoly of aviation fuel
g. Allow fare and free competition for fuel suppliers while enforcing transparent anti-trust legislation
h. Increase transparency and good governance
i. Minimize production risk
j. Increase storage capacities
k. Increase efficiency of human resources
Business
ADB approves $100 million loan to boost skills development and jobs for youth in Sri Lanka
The Asian Development Bank (ADB) has approved a $100 million results-based loan to help Sri Lanka transform its technical and vocational education and training (TVET) system, equip more young people with industry-relevant skills, and strengthen the country’s competitiveness and inclusive growth.
The Skills Development System Transformation Program will support the Government of Sri Lanka’s efforts in improving the quality and relevance of skills training, strengthening links between training providers and industries, and expanding employment opportunities for youth. The program will increase women’s employment opportunities in nontraditional jobs in fields including automotive technology, engineering, information and communications technology, construction, and renewable energy.
“A skilled workforce is essential to Sri Lanka’s long-term economic transformation and competitiveness,” said ADB Country Director for Sri Lanka Shannon Cowlin. “This program will help create stronger pathways from education to employment by making training more responsive to industry needs, expanding opportunities for young people and women, and ensuring that graduates have the skills required by a modern and evolving economy.”
Though Sri Lanka’s economy is recovering, it faces skills shortages in priority sectors, high youth unemployment, and low female labor force participation. Many employers report difficulty finding workers with the skills needed in a changing economy.
Aligned with the Government of Sri Lanka’s Technical and Vocational Education and Training Sector Strategic Framework 2026–2035, the nationwide program will be implemented from 2027 to 2031 and is expected to directly benefit more than 100,000 young people through improved access to quality, employment-oriented training.
Business
USD 40.84m pipeline to secure aviation fuel supplies to BIA
By Ifham Nizam
The government has cleared a USD 40.84 million and Rs. 8,548.75 million contract to build a dedicated aviation fuel pipeline from Muthurajawela to Bandaranaike International Airport (BIA), alongside a massive new fuel storage facility with a capacity of 92,000 cubic metres.
Energy Minister Anura Karunatilaka said the project represented a major investment in strengthening the infrastructure underpinning Sri Lanka’s aviation fuel supply and ensuring more reliable fuel availability at the country’s main international airport.
‘This project will provide the infrastructure required to strengthen the reliability and continuity of aviation fuel supplies to Bandaranaike International Airport, Karunatilaka said.
The contract has been awarded to China Petroleum Pipeline Engineering Company Limited, following an international competitive procurement process in which three bids were received.
The project will see a new aviation fuel storage tank complex constructed at Muthurajawela, together with the associated infrastructure required for handling and transferring aviation fuel.
Business
CSE activity up, turnover weak at Rs. 1.4 billion
By Hiran H Senewiratne
Trading activity on the Colombo Stock Exchange (CSE) gathered pace yesterday as global fuel prices began to show signs of easing, according to market analysts.In this context, both indices moved upwards. All Share Price Index up by 67.97 points while S and P SL20 up by 8.30 points.
Turnover stood at Rs 1.4 billion with seven crossings. Those crossings were reported in Sampath Bank 1.7 million shares crossed to the tune of Rs 238 million and its share price traded at Rs 140, Access Engineering two million shares crossed to the tune of Rs 159 million and its share price traded at Rs 79.50, LOLC one million shares crossed to the tune of Rs 129 million and its share price traded at Rs 129, HNB 100,000 shares crossed to the tune of Rs 38.4 million and its share price traded at Rs 384, JKH 1.9 million shares crossed to the tune of Rs 35 million and its share price traded at Rs 18.60, Hayleys 100,000 shares crossed to the tune of Rs 22.50 million and its share price traded at Rs 225 and Richard Pieris 847,000 shares crossed to the tune of Rs 22 million and its share price traded at Rs 25.50.
In the retail market top seven companies that have mainly contributed to the turnover were Sampath Bank Rs 114 million (813,000 shares traded), JKH Rs 100 million (5.3 million shares traded) LB Finance Rs 49 million (325,000 shares traded), HNB Finance Rs 30 million (27 million shares traded), HNB Rs 27 million (70000 shares traded), NTB Rs 25 million (82000 shares traded ) and Lanka IOC Rs 21 million (666,000 shares traded). During the day 65 million shares volumes changed hands in 10433 transactions.
The Banking and manufacturing sector counters performed well. In the banking sector Sampath Bank let the market while manufacturing sector especially JKH also significantly performed well. With the fuel revision Land IOC also a significant stock at the floor.
Meanwhile, First Capital Treasuries said that Ramesh Schaffter resigned as a Non-Independent Non-Executive Director with effect from October 1, to facilitate the restructuring of the company’s board.
Yesterday the Central Bank announced the US Dollar rate as against rupee. The rupee was quoted flat at Rs 330.65/80 to the US dollar in the spot market , while bond yields dropped, dealers said.
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