by Sanat Nanayakkale

Last week at Taj Samudra Colombo, JAAR Corporate Solutions unveiled a blueprint of opportunities, challenges and the way forward for loss-making Ceylon Petroleum Corporation (CPC).

In addition, JAAR provided a potential public-private partnership (PPP) model for financially-hit CPCs to turn around.

Participating policy makers, experts, investors, economists, and other individuals familiar with the critical reforms needed for the indebted CPCs have identified Lanka India as the sole competitor in Sri Lanka’s retail fuel market. We discussed the reason for the oil company (LIOC). Although Sri Lanka has been profitable almost continuously since its incorporation in Sri Lanka, CPC’s financial situation has been a significant concern for its stakeholders.

The blueprint unveiled by Dr. Janaka Fernando and Andreas Hergenröther was presented to Minister of Electricity and Energy Kanchana Wijesekera, SJB MP Dr. Harsha de Silva and many celebrities for public discussion at the forum.

Both politicians commented in favor of privatizing the CPC while ensuring service quality, pricing accountability and disruption-free distribution of fuel.

The discussion mainly focused on the financials of CPC over the past decade, its product and service portfolio, market structure, employment, social benefits, key performance indicators (KPIs) and the Lanka Indian Oil Company (LIOC) using general indicators. ) and CPC. Numbers, leading causes of losses, proposals for suitable PPP models for potential investors, and policy recommendations to the Sri Lankan government.

Here are the observations made by Dr. Janaka Fernando and Dr. Andreas:

“CPC provides a substantial source of income and expenditure for the government, one of the largest state-owned enterprises. Total CPC debt has grown at an alarming rate over the last few years.”

“The amount of debt of CPC was Rs.529 billion at the end of 2020. By the end of 2021, it was Rs. USD, which is the highest level of debt for a state-owned enterprise in Sri Lanka, while CPC accounts for 37.3% of the publicly-guaranteed debt stock of Sri Lanka’s state-owned enterprises.In addition, CPC’s cumulative net loss at the end of 2019 was It was Rs.33.7 billion.According to CBSL 2021, this was further increased with a net loss of Rs.82.2 billion incurred in 2021 and may increase further in 2022.”

“In contrast, LIOC, the only competitor in Sri Lanka’s retail fuel market, has been profitable continuously except for a few years since its establishment in Sri Lanka. LIOC recorded Rs in 2021. Profit before tax for the financial year ended March was Rs 998 crore and positive profit in retail was Rs.12.3 billion as of the end of March 2021.”

“Many countries around the world are increasingly dependent on the private sector to invest in infrastructure services. PPPs are not an unfamiliar concept in the Sri Lankan oil industry. , has experienced seven successful PPPs since the early 1990s.However, before identifying potential PPP models for CPCs, it is necessary to understand the extent of CPCs in Sri Lanka’s oil distribution process. There are many different forms of PPP models available, and choosing the right method depends on the nature of the particular SOE and the project under consideration.”

JAAR Corporate Solutions made the following policy recommendations to the government to help CPC achieve and maintain solid performance.

of. She will openly discuss her sector-related PPP model and privatization with all stakeholders including governments, trade unions and potential investors.

b. Evaluation and Reduction of Subsidies

c. Minimize currency risk

d. Increase liquidity

e. Introduce a transparent pricing mechanism that covers all costs

f. Breaking the aviation fuel monopoly

g. Allow fuel suppliers to trade fares and compete freely while enforcing transparent antitrust laws.

h. Improving transparency and good governance

Me.Minimize production risk

j. Increase storage capacity

k. Efficiency of human resources