Petroleum Minister Susil Premajayantha is seeking a Treasury guarantee of US$. 10 billion to bail out the Ceylon Petroleum Corporation (CPC) which is now in the red to the tune of Rs. 83 billion.
The minister’s move came as a Finance Ministry official said plans by the CPC to increase its borrowing limit with the People’s Bank for fuel imports would have to be seriously re-considered given its high debt liability.
The CPC, which is facing a financial crisis in importing the country’s petroleum requirements, has to pay Rs. 350 million per day as instalments and interests alone on bank loans.
Salaries were paid via overdrafts obtained from the two state banks – Bank of Ceylon (BOC) and People’s Bank, the ministry official said.
On Thursday, Minister Premajayantha told the Sunday Times he had sought Cabinet approval for the issue of a Treasury guarantee of $ 10 billion to the People’s Bank to increase the bank’s present credit limit to the CPC to US$ 10 billion from the present $1.8 billion –an increase of more than 800 %.
He said the Bank of Ceylon’s credit limit of $10 billion to the CPC would remain unchanged. The CPC has ‘Letters of Credit’ facilities with both banks for import needs with the monthly bill averaging US$ 500 million.
The Finance Ministry official said the CPC had earlier been given Treasury bonds, a debt instrument, to cover debts from the Ceylon Electricity Board (CEB), for oil debts up to December 2009 amounting to around Rs 52 billion.
The bonds would increase the national debt to around one percent of the Gross Domestic Product, he said. CPC trade unions have said the CPC had a total of Rs. 68 billion due from other state bodies, including more than Rs. 50 billion from the CEB alone.