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Corporate sector offers policymakers a blueprint for CPC reform

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Presenting the blueprint to Kanchana Wijesekara- Minister of Power and Energy. From left: Dr. Janaka Fernando-Consultant JAAR Corporate Solutions, Wolfgang Heinze-Director Friedrich Naumann Foundation for Freedom in Sri Lanka and Bangladesh, Minister Kanchana Wijesekara, Dr. Harsha de Silva - SJB MP and Andreas Hergenröther- Joint Managing Director JAAR Corporate Solutions

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



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‘Expolanka Holdings steadfast in posting stabilized Q3 results’

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Expolanka Holdings PLC recorded a steady 9-month performance as at December 31, 2022 amid declines in the overall global markets. Reflecting the underlying strength of its business and success in pursuing a consolidated strategy, the combined 9-month performance delivered a strong endorsement in overcoming challenges in the macro environment with Year-to-date Revenue of Rs. 491Bn, Gross Profit Rs. 85.9Bn and Net Profit Rs. 32Bn. International business continued to generate above 95% in contribution, demonstrating the robust earning potential of the company, an Expolanka Holdings press release said.

The release adds: ‘However, declines in international trade moderated Q3 FY 2022 earnings, recording a Revenue of Rs. 94.2Bn, Gross Profit of Rs. 20.6Bn and a Profit after Tax of Rs. 3.0Bn.

‘Contributing to company earnings was the logistics sector which navigated the challenging macro-economic environment and adopted longer-term strategies concentrating on business fundamentals. For Q3, the sector posted a Revenue of Rs. 92Bn, Gross Profit of Rs. 19.9Bn and Profit after Tax of Rs. 2.7Bn delivering a YTD Profit after tax of Rs. 30.1Bn.

‘Impacting revenues were a reduction in operating volumes across Air Freight and Ocean Freight products due to the overall slowdown in global trade volumes on grounds of high inventory levels, inflationary fears and the global energy crisis. The Air Freight business encountered a relatively larger impact due to challenging market conditions resulting in weakening demand and reduced volumes.

‘Focusing on increased customer penetration, developing partner networks and enhanced competencies, the company was successful in gaining cumulative progress in the Ocean Freight product.

‘The North American trade lane continues to remain the critical business driver for Expolanka, while the European and Intra-Asia companies remained resilient.

‘Reinforcing growth and sustaining improved margins was also due to the company’s focus on strengthening customer relationships, attracting selective new customers and engaging in proactive procurement strategies.

‘Key EFL origins also delivered strong results, reflecting the success of the infrastructure investments made into these markets.

‘The Group’s stabilized 9-month performance was also aided by the continued resurgence in the leisure sector. In Q3 the sector delivered a Revenue of Rs. 725Mn, Gross profit of Rs. 578Mn and Profit after tax of Rs. 202Mn by strengthening its market position focusing on efficient procurement and operational excellence.’

‘Recording a revenue of Rs. 1.6Bn and a Profit after Tax of Rs. 41Mn, the Group’s investment sector remained steady making progress across its business portfolios.

‘Despite the global macro environment remaining uncertain and challenging in the future, Expolanka aims to forge ahead, unwavering in its approach to deliver on earmarked strategic initiatives building on its strong performance. The company stands persistent towards generating accelerated growth and innovation while remaining true to its core values by reaffirming its long-term commitment and challenging the status quo to seize opportunities in the market that would predominantly secure its position as a market leader.’

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Sanasa Life Introduces “Pinsaru Vandana” – A Premium Insurance Policy for Buddhist Clergy

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Helping to elevate and protect the Buddha Sasana, Sanasa Life Insurance has introduced a very special and tailored insurance policy for Buddhist Monks. The “Pinsaru Vandana” insurance policy provides a specialized insurance scheme addressing the special needs of Buddhist Monks. An auspicious inauguration ceremony was held, in the presence of several senior members of the Buddhist Clergy on the 17th of January 2023, at the Sri Sambudhdhatva Jayanthi Mandiraya in Colombo. A total of 300 Buddhist Monks were in attendance at the event, and gave their blessings for this special insurance scheme. A group of dignitaries, including Wishawa Prasadini, Dr. P. A. Kirivandeniya and Piriwena Director, Venerable Watinapaha Somarathana Thero, were also present and played key roles during the event.

“Pinsaru Vandana” is an insurance scheme that provides relief and protection for junior monks, in the event of the death, serious illness or incapacitation of their patron/senior monk. In such an unfortunate event, junior monks can often become destitute and or marginalized. Thus, “Pinsaru Vandana” will help to protect these young monks as they pursue their journey and mission of elevating and sustaining the Buddha Sasana.

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Technocity hosts ‘Together We Win’ training programme in Thailand

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The team at the ‘Together We Win’ training programme in Thailand

The Technocity Pvt. Ltd., the leading Sri Lankan IT Distribution Company, recently held a three-day ‘Together We Win’ training programme at the Rembrandt Hotel in Bangkok, Thailand.

The event, in partnership with HP, invited The Technocity’s top 10 Partners for training in gratitude for the continuous support they have shown towards helping the company develop its business.

The event featured esteemed speakers, including Gehan Thangappan (Business Head, The Technocity), Manish Gawri (Hp Inc., Notebook), T Natarajan (Hp Inc., Print) and M. Kalim (Sales Manager, The Technocity).

The sessions covered various pertinent topics while the invitees viewed a series of product videos during the training to further understand the complexities of the products.

Addressing the invitees, Gehan Thangappan said, “We started small, as all new businesses do, but we’ve grown beyond our borders. This is all thanks to our valued partners and customers who have helped us achieve newer and higher ground. Grateful as we are, we also look forward to providing our diverse clientele with the best products and top-notch service as always.”

The Technocity also conducted a F2F discussion with the partners, briefing them on the way forward and announcing the channel incentive schemes in place targeting Ink Tank Printers. Prior to the conclusion of the event, the attending partners partook in a quiz segment and were treated to exciting giveaways.

“We are very happy with the success of this programme. The training had a very good impact, especially as it was held out of the country and it motivated partners. It was also significant for us as it was the first event we had held overseas after Covid,” Thangappan added.

The Technocity Pvt Ltd is one of the leading distributors in Sri Lanka for IT products and services. In the nearly three decades since its establishment, The Technocity has grown to become one of the most trusted names in the industry. The company is also the first local distributor for HP in Sri Lanka and boasts a portfolio of representation for notable brands like Asus, Lenovo, MSI, Logitech and Viewsonic.

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