• Prepares final agreement to obtain $ 3.6 b Oman loan to procure fuel
• $ 500 m credit facility from India to go before Cabinet next week
• Gammanpila reiterates no CPC price hike, no shortage of fuel despite long queues
• Awaiting Finance Ministry approval for concession to withstand global oil prices

By Charumini de Silva

With the country’s debt piling up, Cabinet has approved a $ 3.6 billion loan from Oman to buy oil and will review a proposal for a further $ 500 million credit line from India next week as part of multiple efforts to manage the burgeoning fuel and foreign exchange crisis. 

Minister Udaya Gammanpila yesterday confirmed a Cabinet nod for the Oman loan in what would be the biggest credit facility for the energy sector, with the necessary paperwork being arranged for the signing of the agreement. 

He also said the proposal on the $ 500 million line of credit from India had been sent to the Treasury for approval and would be submitted to the Cabinet of Ministers for consent next week.

Fresh funding is being sought by the Government amidst a foreign exchange crisis as well as mounting debt, including at State-run Ceylon Petroleum Corporation (CPC), which wants an upward price revision given global spikes. Lanka IOC jacked up prices by Rs. 5 per litre on auto diesel and petrol 92. 

CPC owes $ 3.6 billion to the Bank of Ceylon and People’s Bank, incurring an interest of 5.5%. As a country, Sri Lanka has $ 26 billion in sovereign foreign-currency obligations coming due between now and 2026.

Fuel imports in the first eight months amounted to $ 2.4 billion, up by 42% from the corresponding period of last year. Of that, refined petroleum imports rose by 49% to $ 1.75 billion and crude oil imports rose by 33% to $ 516 million.

“There is no shortage in supply of oil imports to the country. Although the richest and most powerful economies in the world are faced with shortages of oil, our little country has been ensured with uninterrupted supply. Therefore, please don’t get deluded by speculation made by the Opposition and trade unions,” Gammanpila reiterated.

He said the Government had prioritised the foreign exchange needs of the country and at the top of the list was importation of medicines followed by essential food items and energy. 

The Central Bank Governor has assured the release of necessary foreign exchange to import the oil quantities required for the month, he said.

“I’m aware that the Opposition is stunned to see how tiny Sri Lanka survived this crisis when economic powerhouses have collapsed. I must say that it is all because of the proactive planning and actions taken by the Government,” Gammanpila quipped.

The Energy Minister said that the Opposition and the “henchmen” in their trade unions had on five separate occasions claimed the county was running into a shortage of oil, but that it was proved wrong each time.

“The people of this country must understand that these groups are trying to get back to power under any circumstance. But consider these events and situations in a rational manner before falling prey to their traps and burdening yourselves unnecessarily,” he said.

As the market leader of petroleum retail business in the country boasting an 85% market share, Gammanpila said CPC does not intend to opt for a price hike given the economic hardships that the people are faced with amidst the COVID pandemic.

He said that they were eagerly awaiting a response to their request for a concession from the Finance Ministry in the immediate future.

The Minister said that the CPC incurs a loss of Rs. 30 per litre from diesel and Rs. 22 from petrol.

On 11 October, the CPC Chairman Sumith Wijesinghe called on the Government for a price hike, taking into consideration the global market prices and losses incurred by the State-owned entity.

As of 31 August, the CPC has incurred a loss of Rs. 70 billion and it has been estimated that the loss in October would be around Rs. 10 billion or more. 

In order to give relief to the people, the Government kept fuel prices unchanged for over 20 months from 10 September 2019, noted Wijesinghe, adding that with increased world oil prices in April, the Government had to revise prices upward in June. However, since the last price revision on 11 June, Wijesinghe said Petrol Octane 92 prices have gone up by $ 13 to $ 92.01 per barrel, while Diesel has increased by $ 16 to 92.67. 

The import expenditure per barrel of crude oil amounted to $ 74.88 in August 2021, compared to $ 47.74 a year ago. 

LIOC said that since 12 June Brent crude oil prices have increased from $ 72/barrel to $ 86/barrel in the international market.

The recent unprecedented rise in international oil prices has breached seven-year highs. Presently the international price of Gasoil 500ppm is $ 95.62/barrel and Gasoline92 is $ 99.37/barrel.

LIOC said it was suffering a loss of around Rs. 40 per litre on sale of diesel and Rs. 20 per litre on petrol at the current international prices.

Govt. turns deaf ear to consumer cries on skyrocketing food prices