Healthy competition welcome, but no monopoly in business - State Minister Chanaka | Daily News

Healthy competition welcome, but no monopoly in business - State Minister Chanaka

Pictures by Chinthaka Kumarasinghe
Pictures by Chinthaka Kumarasinghe

Oil is the lifeblood of every economy in the world. Black Gold is one of the most coveted resources on earth. Without oil, the economy comes to a grinding halt. The Daily News speaks to State Minister of Power and Energy D. V. Chanaka on the state of affairs in the country when it comes to power and energy.


Q: Do you think we have enough oil stocks in the country?

A: Right now, yes, we have enough stocks in the country and we will also maintain the stocks. We also have buffer stocks. A month ago we did not have the buffer stocks. So right now we are maintaining the buffer stocks as well. There will be no issues with the supply of both diesel and petrol. We are getting enough dollars from the Central Bank as well as the bank system.

Q: Is there a shortage of kerosene oil in the country?

A: Actually we had a shortage of Kerosene oil two weeks ago. But we have got two shipments of jet fuel. Until the 17th of October, we had this shortage, but now it is under control.

Q: The CPC is paying huge demurrages as oil ships are being kept in the Colombo Harbour for weeks and months. What action have you taken to mitigate the situation?

A: Recently the demurrages we pay for the suppliers have decreased. We want to completely get over this problem. It is something that is not under our control. We are getting dollars either from the Central Bank or the banking system. So we give the orders, we get the supply from the suppliers. But the dollars are coming from somewhere else, which we have no control over. But for now we are introducing a new modality. In the future, whoever are the suppliers who come to Sri Lanka, they will store their product in our storage, and whenever we have the dollars, we will buy from them. So the consigner will be CPC, but it will work as a bonded warehouse, bonded storage, where they will store their fuel and we will buy it from them. There will be three benefits. One benefit will be that there will be no demurrages. The second benefit is that we do not have to have a huge amount of dollars at once. At the same time in future we should be able to decrease the premium. There is a risk insurance involved. Because the ships have to be in the sea for a couple of days or weeks, we can get over that insurance, at the same time the ship cannot plan their next trip, so there is a charge on that. So that is all included in the premium. But with this new modality, it is going to the next Cabinet; this may take another week or two, but then onwards for all the tenders we will follow that modality. So, for this month we have to finish our tenders and supplies. So we have already started convincing suppliers and negotiating with them. We are having these conversations. So there will be no demurrages included.

Q: These days there is a noticeable change in the country. We see the public transportation system back to normal. There are lesser queues at petrol stations. How did the Ministry of Power and Energy manage to bring the situation under control?

A: I think we should be thankful to Minister Kanchana Wijesekera, and the whole CPC team. They had to do so much hard work. In the past people had no way to reach the fuel. So even though fuel was available at the petrol stations, people had no way of reaching them. There were mafias and the same people being in the queues every day. Then all over the country people were collecting fuel and sold them for higher prices – black market. But after introducing the QR code, everyone has access to fuel and everybody has access to the petrol station and there is a certain limit. It is enough for the day-to- day work and businesses of the majority. Now it is all under control thanks to the team and the Minister Kanchana Wijesekera. Actually what was supplied was more than the demand. But still there were queues. But what we used to supply and what we are supplying is much less now, but still there are no queues. The Minister was in conversation with all the IT departments and private sector and a lot of research was done. Finally, he got a good team together. They all came together and they came up with this solution. Even he was surprised by the success of this plan. Finally now everything is going on smoothly. Even public transportation is back to normal and in the future we will be introducing a separate QR code for the buses and three- wheelers. So now we are doing research, we are doing a study – which sector needs more than 20 litres, which sector needs more than five litres. Whoever needs more, we will provide more. Whoever needs less, we will reduce it. So based on our studies we will decide that.

Q: In your opinion was the QR code system a success?

A: Definitely. Yes.

Q: Parliament approved a Bill amending the existing Petroleum Corporation Act allowing the private sector to import and distribute petroleum products. Some trade unions are protesting this Act claiming that this will destroy the CPC and it will affect national security. Your comments?

A: I have a doubt how it will affect national security? Whether it is the CPC or a private supplier, we will have to import from somewhere else. The main argument in Parliament was that, if Russia can control Europe, not giving fuel or energy, it could happen to Sri Lanka as well by giving this away. But it could happen if we are the only one bringing in the fuel. But with this new amendment, there will be a huge competition in the country. So there will be many companies. One LIOC, One CPC, there will be three or four players coming in. As a country, in Sri Lanka what we need is, per month, right now 120,000 metric tons of diesel. Around 90,000 – 100,000 metric tons of petrol and a small amount of other products like Jet Fuel and Kerosene, around 45,000 metric tons. So that is our demand. As the CPC, even if we go to the market, that is the maximum we buy for a month. But the big suppliers like the big players, they will buy that product ten times per day. So their market reach will be huge. And the price they are getting is very low. So that will help us to reduce prices. There will be competition. In some cities in the world, there are many fuel stations, bought by different parties. Sometimes each and every petrol station has different prices. Every hour the price changes. That is what we want to bring into the country. One thing we want to make sure is that everything we do will benefit the CPC as well as the Government of Sri Lanka.

Q: What are the new features of this Act and why did the Government want to change the present system? What are the benefits to the country?

A: For the whole country right now our biggest problem is the dollar. It is the dollar shortage. So what we are expecting is 2.9 billion dollars from the IMF. That is the discussion we are having now. For the supply we are going to give to the private party, we have to have a credit period of one year. One year may save us around a minimum of two billion to three billion dollars. It depends on how people will go and buy from them. Two billion to three billion dollars which is almost equal to the IMF. In the world, if there is a country bankrupt or if there is a country in a default status, either they will come out of it in a short period. Otherwise it will take years and years. People are struggling. We need to come out of this in a short period. So, on one hand we are working with the IMF. On the other hand, we are working on methods where we can save our dollar outflows. So we want to make it competitive and it will bring the prices down.

Q: Are you giving 100 more Petrol Stations to IOC?

A: Actually we have given approval for 50 more. That is the only discussion we have had.

Q: IOC India has told the Daily News that they are willing to invest in the LPG Gas business, if Sri Lanka breaks the monopoly and if invited. Aren’t you also going to liberalize the LPG business in Sri Lanka?

A: Already we have Litro as well as Laugfs. So both are there. But still we would consider making it competitive. But we have not discussed anything yet. But what I believe is that everything has to be competitive. I remember before Dialog, Etisalat and Mobitel, there was only one company running the show. But once all the players came in, the prices reduced. More benefits to the country. We have to have competition in every sector. It could be Government and it could be private. The competition should be there everywhere. There should not be any monopoly in any business.

Q: Renewable energy is the most cost-effective source with Sri Lanka having ample sunlight and wind. Sri Lanka aims to become carbon neutral and generate 100% of its power through renewable energy by 2050. Do we see this happening at the present?

A: Right now yes. Actually Sri Lanka is already generating 50% of its power through renewable energy. So with hydro, wind and solar, we already have 50%. The previous Government aimed to be 70% by 2030. So that is the policy we are having, even with the new President. He wants to continue that policy. Even though we are continuing that policy, we are doing studies as well. Because Liquefied Natural Gas (LNG) is not included in that 70%. So if we are converting our diesel to LNG and our power plant to LNG it will be hard for us to reach that 2030 mark. But at the same time, we are focusing more on solar. Unfortunately, the battery system is very costly. But for the night we may need either LNG, coal or wind. Right now what we are working on is renewable energy. For rooftop solar we are getting 150 megawatts for a year. So we are working on the wind power and all other renewable energy sources. At the same time we are focusing on a more sustainable and stable source as well. Solar and Wind are not always stable. So we need either LNG or coal or something to stabilize the system. So we are working on it.

Q: These days a lot of people want to know when we can get back to normal. When will these power cuts stop? Can you tell us if this is a realistic possibility during the latter part of this year? Because the power cuts are really disrupting the work schedules of Sri Lankan students? Some of the 350,000 students who sat the university entrance (A-level) examination held from February 7 to March 5 said they faced hardship due to the power crisis.

A: Even we asked the CEB what they need if we want to go for 24/7. We have enough megawatts in our system. The only thing is we do not have enough dollars to provide that. So if we are going for 24/7 without power cuts, other than diesel we have to look at other sources which are very costly. And we have to use the dollars to import them as well. There is no short term solution, unless we use diesel, naphtha and all that. But in the future we are working on renewable and other power plants. The unit cost will be less and it will be 24/7. So right now, if we want to go for 24/7 we have to run those power plants as well. So the Government has to take the decision whether we are going for the power cuts and save the money or use those dollars to bring the diesel or naphtha and without going for power cuts. But we may have to sacrifice from somewhere else.

Q: Due to the Russian - Ukraine War, oil prices have spiraled upwards. How will this continue to affect Sri Lanka?

A: I think if you go two years back, at the beginning before the new Government, the prices went down to 20 - 30 dollars per barrel. But now what we are getting is diesel around 135 plus premium. If you go for petrol, it is around 98. When we took over the Government the prices per barrel in dollars it was in between 20 – 30. But right now, if it is petrol today the price is 91 plus premium. If it is diesel 137 plus premium. So the prices are hiking, but one thing, right now what we are doing is, if there is a profit under CPC, we will give that benefit to the people. But if there is a loss, it has to be borne by the consumer as well. We do not run this as a profit making or loss making company. So what we get we will give that to the consumer as well, but if the price goes up or down that will have to be borne by the consumer as well.

Q: When Russia agreed to send oil to Sri Lanka, why didn’t you grab that offer?

A: We are having discussions. The Sri Lankan Ambassador in Russia has confirmed that they have agreed on the Credit Line and they are working on it. They have asked for some information from us and we have shared that information. Hopefully if we get the revolving facility of a Credit Line that will help us to run the refinery. Right now we are only bringing the refined products rather than bringing in the crude and refining it. So right now we cannot bear a high amount of dollars per month. But if we get the Credit Line, a loan or some revolving facility, then we can bring in the crude oil and start our refinery and start the function.

Q: Three-wheeler drivers are demanding you to increase their quota. Why are you delaying it and how many litres are you going to give them?

A: At the meeting we had with the President, it was decided to go up to ten litres. Right now we are getting information from the Police and other relevant authorities - which three-wheelers are using their vehicles for their occupation and who owns private three- wheelers. It could be three-wheelers or buses or any other sector, we will provide a reasonable amount.

Q: 2023 will dawn upon us in a little more than one month. Can you assure the public of Sri Lanka that 2023 will be better than this year? That there is a light at the end of the tunnel?

A: The situation is certainly getting better. First, when Minister Kanchana came he had two problems. One is that he did not have the rupees to buy the dollars. Then, once he had the rupees, he did not have access to dollars. Right now we have access to rupees. Earlier the CPC used to be a loss making company. Right now we have a comparative price and we have enough rupees, and also access to dollars. So I do not think there are any issues. But with the IMF and with our new modality, I hope the situation will ease.

Q: In July this year, Power and Energy Minister Kanchana Wijesekera asked the country’s expatriates to send money home through banks to finance new oil purchases. Has this actually happened?

A: It is better than what it used to be, but not up to our expectations. By sending through the banking system we can control inflation and get enough dollars. So that will improve our supplies. We are telling them, come through an official channel, through the banking system. That will improve everything. It could be dollars or any other currency. So if they send it, yes, it would make a huge difference. If you go back to 2019, our imports were 20 billion. Our exports were 10 billion. So there is a huge gap. A 10 billion gap. In 2019, how we covered this gap was – US$ 4.5 billion from tourism, and the rest from the remittances. But in 2020/2021, we lost that US$ 4.5 billion. At the same time remittances stopped. If we can bring back these remittances, if workers start sending through the normal channels, we can normalize the country. That will solve most of our problems.


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