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Lube
marketers to pay double for licences
The monopoly stakeholder, Caltex Lubricants, has agreed to the increase amidst allegations by its smaller counterparts that Caltex is trying to crush the competition. Trevor
Reckerman, Joint Managing Director, Exxon Mobil, distributors of
the Esso brand said that the Motor Traders’ Association has
proposed a 0.5 percent license fee on the turnover but Caltex Lubricants,
which is leading the market has agreed to the government proposal
of a 100 percent increase. “They can afford to pay that money,
because their turnover is very high. He said that it is only fair, Caltex also pay 0.5 percent on their turnover. “Their turnover is in excess of Rs. 5 billion and 0.5 percent will come to around Rs. 25 million, which is high revenue for the government as opposed to the Rs.10 million that is proposed by the government,” he said, adding that the 0.5 percent proposal will help to establish a level playing field. He said the retail market, including Ceylon Petroleum Corporation outlets, is now open to all players, but price disadvantage and channel acquisition by the top player bars fair trade practices. Market
analysts said the licensing fee is likely to strengthen market leader
Caltex’s position, as it is not subject to the license fees
at present. “Caltex retains market dominance after 10 years of monopolistic practice. Servo’s entry in 2003, with propriety outlet network, presents challenge to Caltex with four other players maintaining significant presence in the upper segments, despite the smaller niche market estimated at Rs. 500 million with a 10 percent growth per year,” Reckerman said. He said that investments in blending are discouraged by the 10-year Caltex monopoly, Caltex’s excess capacity and the small scale of local market. Meanwhile Caltex Managing Director/CEO Kishu Gomes rejected claims that the lubricant market in not evenly placed. In a letter to A P A Gunasekera, Secretary, Ministry of Petroleum & Petroleum Resources Development, he said all players including Caltex pay the same duty rate for finished products (28%). “We too import some finished products for which we have been paying the same duty since the market liberalization in 1999.” He said there is a duty differential of 13% between finished products and raw materials for local value addition which is a global phenomenon for protection of a country’s economy. This has resulted in Indian Oil Corporation and Laugfs Gas Pvt Ltd too deciding to invest in blending plants in SL. “An unhealthy duty differential may discourage local investment that will be detrimental to the country’s economy. We believe that the current duty gap is fair and equitable with the duty structure for other important industries,” he said adding that other lubricant players sell some products less than the Caltex price contrary to the published communication. IOC sells most of their products much less than Caltex. Gomes
said many makes the mistake of calculating Caltex’s market
share based on imports ignoring the fact that a substantial quantity
is exported to other markets and the quantities include non-lubricant
product range too. He said Caltex markets over 130 products and
365 different pack sizes for every Automotive and Industrial application
here while most other players have less than 50 products in their
product range. “Therefore, it is obvious that they cannot
get the maximum out of the market potential,” he added |
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