Crying over spilt fuel

Saturday, 2 July 2011 00:00 - - {{hitsCtrl.values.hits}}

THE Ceylon Petroleum Corporation (CPC) has added to its woes of Rs.14.7 billion losses last year. When leakages in the CPC pipeline were detected it was clear that millions worth of fuel was being lost on a daily basis and officials were quick to step up and pledge that remedial measures would be taken. However the question is why they did not do so before and why the State giant is continuing to make colossal losses.

Media reports clearly showed that coconut trees near the pipeline had died from the constant leakage of fuel. This means that the leakages had been allowed to go on for several months despite the officials knowing that the guaranteed life-expectancy of the pipeline has expired. Therefore the public has every right to think that there has been negligence in the matter. If the authorities could take steps to set up an alternative pipeline for the most badly leaking 300m of pipeline within a matter of days one wonders why this step was not taken sooner, saving millions of public money.

What is even more telling is that the unions of the CPC allege that the new pipeline constructed at a cost of US$ 70 million to carry fuel directly from vessels to the Muthurajawela tank is a pointless project and the money would have been better served in repairing or providing new pipes to the leaking line. The fact that the CPC is paying the State bank that funded the project Rs. 85 million is also an indication as to why the CPC’s financial haemorrhages are continuing. There is no possibility of stopping the loan and now that the off-shore pipeline has been constructed there is also little point in crying over spilt milk — or in this case fuel.

Obviously the bulk of CPC’s financial haemorrhages are due to mismanagement. Even though the minister consistently trots out the excuse that the CPC is selling fuel at a loss — Rs.2 per litre of diesel and Rs.33 per litre of petrol — according to the latest estimate, there are times when the retail price in countries such as the US is lower, showing that mismanagement rather than subsidies is what is draining the white elephant institution.

The CPC’s losses grew from Rs. 12.3 billion to Rs.14.7 billion from 2009 to 2010 and the trend is set to continue this year unless the situation changes drastically. It would be unrealistic for anyone to expect that the CPC can wave a magic wand and suddenly become efficient but this latest incident highlights yet again the importance of at least putting in place a plan that will eventually make the CPC solvent.

Even though the Ceylon Electricity Board (CEB) is still burdened under considerable debt they have at least put together a plan to eventually become a profit making institution. While in the case of the CPC the CEB is actually adding to its problems by owing an estimated Rs.52 billion for the fuel used to run power plants it can at least take the stance that a beginning has been made.

It has been estimated that as much as 2% of GDP is being leaked out by loss making State Owned Enterprises (SOEs). For Sri Lanka to reach a level of development these numbers have to be reduced not just in the CPC and CEB but dozens of enterprises under the government.