Sri Lanka Allows Firms From Oil-Producing Nations to Sell Fuel in Retail Markets

Sri Lankan government has imposed restrictions on fuel supplies, allowing only port, health services, and food transport to purchase oil from the market till 10 July. The island nation is suffering from an unprecedented foreign exchange crisis, resulting in a shortage of essential commodities.

Sri Lanka on Tuesday opened its fuel import and retail sales markets for firms belonging to oil-producing countries, a measure which the government hopes may ease crippling shortages that have paralyzed most of the economic activity in the island nation.

The move will also end the duopoly of state-owned Ceylon Petroleum Corporation (CPC), controlling 80% of the fuel market, and Lanka IOC, a unit of Indian Oil Corporation.

The cabinet approved the proposal hours before a high-level delegation left for Qatar and Russia to arrange fuel for immediate needs.

Minister of Energy Kanchana Wijesekera said the firms would be able to operate without Forex requirements from the Central Bank of Sri Lanka (CBSL) and other banks.

“This exemption of Forex requirements will be permitted for the first few months of operations,” the minister said.

The cabinet has asked the CPC to provide its logistics, stocking, and distribution service to the foreign firm, suggesting that the government would privatize a debt-ridden state-run firm which controls around 80 percent of the market.

However, the refinery business will remain with the Ceylon Petroleum Corporation, which was operating with a monthly loss of approximately $90 million last year.

On Monday, the government restricted fuel sales to port, health services, and food transport until 11 July, citing the "unprecedented state of finance and foreign exchange crisis.”

“All other sectors are requested to stay at home and provide services online in this difficult time,” Bandula Gunawardena, the government spokesman, said.

Last Wednesday, Sri Lankan Prime Minister Ranil Wickremesinghe said the economy had “completely collapsed,” showing the inability to purchase fuel as shortages of essentials and electricity worsen.

The government is in talks with Qatar, Russia, and India to arrange for fuel until the forex crisis gets resolved. The island nation has also planned a credit conference with the participation of India, China, and Japan to arrange for loans for food and fuel purchases.

A negotiation with the International Monetary Fund is in progress and will likely be finalized by July.

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