News
Fuel purchase: Billion-rupee racket or monumental mistake at CPC?
Despite persistent media exposures particularly in the Sunday Times of tender irregularities at the Ceylon Petroleum Corporation (CPC), the crisis over the procurement of petroleum products continues, sources said.In the latest allegedly irregular tender, a fuel oil purchase contract that had been extended for six months has been worked out in such a way that the country stands to lose more than Rs. 1 billion, the source said.
It is alleged that one payment has already been made for the first shipment and for the second, the letter of credit (LC), has already been opened with the vessel carrying the cargo due yesterday.
Fujairah Petroleum Co. had contracted with the CPC to supply four cargoes of low sulphur fuel oil (LSFO) on a six-month term contract of 35 to 40,0000 tons per shipment.
The price quoted at the tender which closed on September 2 last year was as follows:
“Singapore Platts Low Sulphur Fuel oil price +$54 per ton”.
Upon completion of the contract, it was extended by six months on the same price formula as approved by the Cabinet.
However in the renewed contract, the price formula has been amended adding a new clause.
The amended price formula is as follows: “Singapore Platts Low Sulphur Fuel oil price +$54 per ton. “Low Sulphur Fuel oil price means High Sulphur Fuel Oil Price plus US$ 54 per ton.”
The sources said that, by the said wording, as stated in the contract, the CPC would be paying an additional $54 per ton for ‘High Sulphur Fuel Oil’ which would be double the earlier price.
The extra payment for a shipment of 40,000 metric tons is about US$ 1.88 million or Rs. 200 million. For four shipments the loss would be a billion rupees, the sources said.
Petroleum industry sources alleged that Fujairah Petroleum Co. was only a front to show that it was a government-to-government to contract, but the party behind the deal was a company that had been blacklisted by the CPC previously and reinstated during the recent past upon payment of US$ 200,000.
When contacted, CPC officials said the matter was resolved but refused to give details.
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