Government liberalises fuel procurement process
The Government has been forced to liberalise fuel imports with the entry of six new private firms after 12-odd agents of foreign suppliers registered with the Ceylon Petroleum (CPC) stopped engaging in tenders as the CPC owes them huge sums of money on past supplies.
It has to settle US$725 million in overdue payments to suppliers and also struggling to open letters of credit in state banks for future shipments due to a further $355 million owed to banks.
The Energy Ministry has taken this decision as the CPC is facing financial constraints and its massive debts to state banks resulted in cash flow issues, official sources said.
The Power and Energy Ministry is even allowing marine bunker firms to import fuel using available logistic facilities while controlling the distribution to save available dollars, a senior official of the ministry said.
He stated that four of the six companies have been given permission to import crude oil after considering their proposals and the other two suppliers have been allowed for the import of petrol and diesel required for the coming week.
In addition, he said that three of the six firms have informed that they will supply a crude oil shipment if the Central Bank is ready to provide a bank guarantee of $100 million.
These local private suppliers are importing fuel placing orders with foreign oil exporters by opening temporary LC’s in state banks by depositing money in rupees obtained for their fuel shipment for its payment in dollars to the foreign exporter, a senior official of the Bank of Ceylon explained.
One such shipment of 40,000 metric tons of fuel ordered by a newly selected private supplier by opening an LC at the People’s Bank was scheduled to arrive at the Colombo Port on Friday.
Sri Lanka’s monthly fuel bill is around $311 million but it has increased to $700 million in April this year due to the payment of demurrages for shipments, middlemen’s transactions and spot purchasing.
This fuel bill could be maintained at $500 million per month by resorting to a term tender, awarding it in a proper procedure, a former CPC chairman told the Business Times.
In terms of foreign exchange earnings, the country’s export revenue increased to $15.72 billion in 2021 from $10.05 billion in 2020.
Export revenue in March 2022 was $1.057 billion and it has come down to $915.3 million in April and again increased to $1.2 billion in May, Finance Ministry data showed.
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