CPC faces $ 13 m monthly losses after Excise Duty hike: Minister

Reuters: State-owned Ceylon Petroleum Corporation will incur a loss of about Rs. 2 billion ($13.78 million) per month after the Government raised Excise Duty last month, the Petroleum Resources Minister said on Monday.

The Finance Ministry, which is under pressure from the IMF to increase revenue, raised the Excise Duty on diesel by Rs. 10 to Rs. 13 with effect from 20 August without increasing diesel’s retail price. Conditions imposed by the International Monetary Fund in return for a $ 1.5 billion, 36-month loan require reforms of the State sector which has put the Government under pressure to seek new sources of revenue.

“It will be close to Rs. 2,000 million,” Minister Chandima Weerakkody told a Foreign Correspondents’ Association Forum in Colombo, referring to monthly losses that the State-owned Petroleum Corporation (CPC) faces.

“There is a slight profit for diesel, but for petrol anyway there is a loss. With this Excise Duty, our production at refinery is also taxed.”

Sri Lanka’s only 50,000 barrel-per-day refinery also supplies fuel in addition to imported refined fuel.

Weerakkody, however, said the CPC earned a profit after tax of Rs. 46.5 billion in the first half of the year against a loss of Rs. 13.2 billion in the first 11 months of last year.

He said a price formula has been considered for fuel prices in line with the world market prices, but it has not been implemented.

Diesel has been at Rs. 95 since the fuel price was last revised down in January 2015.

The CPC and Lanka Indian Oil Corporation, a subsidiary of Indian Oil Corporation, are the only two firms selling diesel in the island nation.

Prices are set following talks between the companies and the Government.

The Colombo-based JB Securities, a leading stockbroker, last week said in a note to investors that the tax changes were a step in the right direction but the way it was imposed could have an impact on the company’s profitability.

“What is dumbfounding is good tax policy has been totally negated by not passing on these taxes to the consumer, it has been left to the two oil companies to bear ... the loss per litre for CPC will be much higher due to its inefficiency so the profits they have made in the year to date will be wiped out by the end of the year.”

Govt. promises uninterrupted power supply 

Uninterrupted power supply will continue despite the prevailing drought conditions, Power and Energy Minister Ranjith Siyambalapitiya assured yesterday as monsoon rains continued to stay away.

Siyambalapitiya met with Petroleum Resources Minister Chandima Weerakkody to assess the current energy generation situation and capacity issues the country might face in the weeks ahead if the drought continues, his ministry said in a press release. 

“We will take whatever steps needed to ensure an uninterrupted supply of power,” Siyambalapitiya was quoted as saying in the statement. 

As the hydro component of power reduces, thermal power plants will have to step in to cover the deficit. Norochcholai, Sri Lanka’s only coal power plant, is also reported to be functioning at full capacity.       

The Public Utilities Commission of Sri Lanka (PUCSL) on Monday announced the approval of the Ceylon Electricity Board’s (CEB) Long-Term Generation Expansion Plan (LTGEP) 2015-2034 after the Government last week confirmed it had decided not to go ahead with the coal-powered power plant in Sampur that was signed a decade ago with the Indian Government. 

However, in order to avert a power crisis, the PUCSL emphasised that plants identified in the approved LTGEP for the period from 2017-2020 should be immediately constructed and operated in the 2018/2019 period. 

Under the new plan an ambitious target of 4,955 MW by 2020 is set to boost the currently installed capacity of 3,900MW, which is a 25% increase. 

These plants include two thermal power plants with a capacity of 170 MW in the southern region, 105 MW gas turbines, 300 MW natural gas power plant and several renewable energy power plants with a capacity of 700 MW which includes three major hydropower plants.  

The LTGEP is approved by the PUCSL on the basis that the proposed power plants will ensure the energy security of the country.