CPC, LIOC to enjoy extra duty waiver on fuel imports

Friday, 29 January 2021 02:10 -     - {{hitsCtrl.values.hits}}

Finance Minister Mahinda Rajapaksa has recently granted an enhanced duty waiver on Customs duty on the import of petrol and diesel, a move that will benefit State-owned Ceylon Petroleum Corporation (CPC) and listed Lanka IOC PLC.

Effective from 1 January, the new waiver ranges from a low of Rs. 11 per litre to a high of Rs. 17 per litre. For example, the duty on Petrol having Octane 92 was at Rs. 50 per litre and there was an existing duty waiver of Rs. 7 per litre. From 1 January, a new duty waiver of Rs. 11 per litre has been granted bringing the full waiver to Rs. 18. Recoverable Customs Import duty on this Octane 92 is now reduced to Rs. 32 per litre. On Octane 95, as opposed to the prevailing Rs. 50 per litre import duty, the new rate is Rs. 34 per litre. This is after granting a Rs. 10 per litre waiver to the existing Rs. 6 per litre. On Super Diesel that contains Sulphur not exceeding 10 mg/kg (ppm), import duty which was Rs. 25 per litre has been reduced to Rs. 10 per litre, and other Diesel that contains Sulphur exceeding 10 mg/kg (ppm) but not exceeding 500 mg/kg (ppm), reduced from Rs. 25 per litre to Rs. 5 per litre.

The Finance Minister hasn’t granted a waiver on category of “Diesel Other” and duty remains at Rs. 25 per litre.

The Government slapped a higher import duty earlier on to recover revenue in tandem with a drop in oil prices globally. 

CPC Import Prices (CIF) per barrel was $ 41.77 in October 2020 as against $ 66.06 a year before. CPC has been enjoying lower prices, ranging between a high of $ 56 per barrel and a low of $17 per barrel, since March 2020 in comparison to 2019.

The CPC earlier this month told the Parliament Committee on Public Enterprisers (COPE) that it saved $ 300 million in foreign exchange in 2020 due to the drop in world crude oil prices.

CPC Chairman Sumith Wijesinghe said that the Government was able to take advantage of the fall in the price of crude oil last year due to the outbreak of the coronavirus and several other reasons. 

The CPC Chairman stated this in response to a question raised by COPE member and SJB MP S.M. Marikkar, on the profit made by the CPC during the last year following a fall in crude oil prices.

Given the COVID-19 pandemic and restrictions, diesel sales in the first 10 months of 2020 were down by 20% to 1.5 million tons from a year earlier, whilst petrol sales were down by 11% to 1 million tons. Crude oil imports were down by 12% to 1.38 million tons and other petroleum imports were down 12.5% to 3.4 million tons.

Whilst financials of CPC are not available, Lanka IOC in the first half of FY21 reported a revenue of Rs. 29.4 billion, down from Rs. 40 billion a year earlier, whilst in the second quarter it was Rs. 18.7 billion, down from Rs. 21.4 billion in the corresponding period of FY20.

LIOC reported a gross loss of Rs. 4 million in 1H of FY21, in comparison to a profit of Rs. 2.1 billion. In 2Q gross profit was Rs. 576 million down from Rs. 1.6 billion a year earlier. 

LIOC reported pre-tax loss of Rs. 956.8 million in 1H as against a profit of Rs. 378 million. In 2Q pre-tax profit was Rs. 41 million, down from Rs. 645 million a year earlier.