India agrees to send two oil shipments to Sri Lanka

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The Indian Government has agreed to provide two oil shipments to Sri Lanka in view of the urgent fuel needs of the crisis hit Island nation, a top Sri Lankan Government official told Finance Today.

Accordingly, the two ships carrying the fuel are scheduled to arrive in Sri Lanka within the next 7-10 days.

It is said that this is a result of the discussions held by the Sri Lankan High Commissioner to India Milinda Moragoda with the Indian Minister of Petroleum and Natural Gas and Housing and Urban Affairs Hardeep Singh Puri, the Central Bank of Sri Lanka has agreed to release about $ 100 million for this purpose.

According to the statement issued by the Sri Lankan High Commission in  India, the High Commissioner and the Minister also discussed modalities through which India and Sri Lanka could further expand cooperation in the petroleum sector to help overcome the immediate crisis and to ensure energy security in Sri Lanka. In this context, High Commissioner Moragoda and Minister Puri discussed ways and means through which Sri Lanka could establish long-term ties in the petroleum, oil, gas and related logistics sectors.

Until this Indian stock of fuel reaches Sri Lanka, the government is now in the process of handing over the existing limited stock of fuel to the priority sectors only.

The quantity of fuel that Sri Lanka receives from India has not yet been confirmed. However, it has also not yet been confirmed how long the fuel will last, so there is no clear understanding  on the government’s ability to meet the future fuel demand. Therefore, President Gotabaya Rajapaksa instructed the officials to formulate a formal plan for the next few months to manage and maintain the fuel supply properly.

Therefore, a government delegation has been appointed to visit Qatar and Russia to meet their needs.

In a recent meeting with the President Gotabaya Rajapaksa, fuel supply agents pointed out the need for direct engagement of the CBSL Governor and the Secretary to the Treasury with the mother companies supplying fuel, international banks and financial institutions.

It is also said that about 700 million dollars has to be paid to the suppliers who have been supplying fuel to the country since last January.

“Many suppliers refuse to supply fuel to Sri Lanka due to delays in payment of arrears. Due to this some ships returned. Some people ask for advance payments. There is no possibility of making such an advance payment,” an official said.

Cash-starved Sri Lanka to end fuel duopoly to ease shortages

Sri Lanka will allow companies from oil-producing countries to import and sell fuel, the power and energy minister said on Tuesday, ending a duopoly as it tries to overcome a shortage of petrol and diesel that is exacerbating an economic crisis.

The Cabinet decision came as the Minister, Kanchana Wijesekera, headed to Qatar and a ministerial colleague was due to arrive in Russia on Sunday for talks on energy deals.

“Cabinet approval was granted to open up the fuel import and retail sales market to companies from oil-producing nations,” Wijesekera said on Twitter.

“They will be selected on the ability to import fuel and operate without forex requirements from the CBSL (central bank) and banks for the first few months of operations.”

The state-run Ceylon Petroleum Corporation (CPC) controls about 80% of the fuel market and Lanka IOC (LIOC.CM), a unit of Indian Oil Corporation (IOC.NS), the rest.

The Cabinet also allowed bunkering companies registered with the government to import jet fuel so that flights are not disrupted, the government said in a statement.

Sri Lanka needs about 1.2 million litres of so-called A1 jet fuel a day to supply airlines but the CPC has been unable to meet the requirement, the government said.

Wijesekera flew to Qatar late on Monday night while Education Minister Susil Premajayanth is due to arrive in Russia on July 3.

Wijesekera hopes to find a long-term fuel supplier in Qatar who is “willing to work with Sri Lanka’s foreign exchange and other challenges”, said a ministry official, who declined to be identified as he is not authorised to speak to media.

(Reuters)

Indian verdict

However,India had earlier agreed to provide an additional credit line of US $ 500 million for fuel imports, but now it is learnt that the planned credit line has been rejected.

The Indian delegation, which visited Sri Lanka recently, said it was difficult to allocate an additional USD 500 million with the assistance of the Indian Exim Bank to purchase petroleum products for Sri Lanka amid mounting economic problems in India.

India has extended credit lines worth USD 700 million so far for fuel imports, as part of the up to USD 5.5 billion assistance extended since January, and delivered over 500,000 MT of fuel.

By Ishara Gamage