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CPC to obtain $ 2.5 b loan at low interest rate 

15 Sep 2021

  • Receives loan offers from Singapore, Australia, and China
  • Money to be used to repay debts to state bank
  • Trade unions unhappy
By Imsha Iqbal Debt-ridden state entity Ceylon Petroleum Corporation (CPC) is expected to obtain a $ 2.5 billion loan from the international market at a lower interest rate, according to the corporation’s Chairperson.  CPC Chairman Sumith Wijesinghe said this during a press conference on Monday (13), responding to an inquiry made by a journalist with regard to the progress on securing the aforementioned loan. Noting that a loan is anticipated to fund the petroleum sector while the lower interest rate would be an opportunity for the country, he stated: “We contemplated obtaining loans at lower interest rates to fund the petroleum sector of the country. We have received favourable reactions. We believe we can obtain loans from those relevant corporations.”  However, the trade unions which represent the petroleum sector of the country expressed their dismay with regard to the above-mentioned loan. Speculating that perhaps the CPC Act would have to be amended in order to obtain the loan, Petroleum Corporation National Employees’ Union Chairman Samika Asithanja said: “So far, we have not been notified of obtaining loans or contracts from foreign nations. We suppose they are attempting to amend the CPC Act in a bid to meet a requirement in this deal.”  Furthermore, speaking on behalf of the trade union, Asithanja stated that it is not ideal for the Government to allegedly foregore the Finance Minister as well as the Treasury in order to obtain such a loan.  Meanwhile, Petroleum General Employees’ Union Chairman Ashoka Ranwala alleged that the Government is completely responsible for these circumstances.  Last month, The Sunday Morning Business exclusively reported that along with the CPC’s recent requests from the Bank of Japan and State Bank of China to obtain loans at a lower interest rate receiving unfavourable responses, the CPC has now received offers for loans from Singapore, Australia, and other lenders in China.  The CPC is desperately looking for credit lines from bilateral lenders to settle the debt it owes to two leading state banks – Bank of Ceylon (BOC) and People’s Bank.  Speaking to The Morning Business last month, CPC Deputy General Manager – Finance Varuna Nilanga Weerasooriya stated that the CPC is currently evaluating a total of 21 proposals submitted from countries such as China, Australia, Singapore, and others, after which a report will be submitted to the Cabinet.  “After analysing the proposals, the final report will be submitted to the Cabinet in the coming week or two,” Weerasooriya said.  Moreover, speaking to The Morning Business, CPC Chairman Sumith Wijesinghe confirmed that the CPC is in the evaluation stage, after having received potential applications from different countries over a period of two weeks.  With the CPC owing colossal sums to two major state banks at high interest rates, the Sri Lankan authorities recently requested credit from Japan and China at a comparatively lower interest rate to pay back the money the loss-making state institution owes the banks.  However, speaking to us in June, Minister of Energy Udaya Gammanpila stated that after evaluating Sri Lanka’s loan request, both the international banks – Bank of Japan and State Bank of China – refused to grant the loan of  $ 1 billion at an interest rate lower than the existing rate of 5.5%.  At the time, Gammanpila noted: “We are in debt to BOC and People’s Bank. Therefore, we asked the Chinese and Japanese Ambassadors if they could provide loans to replace the existing loans with a lower interest rate. However, after the calculation and evaluation, they said they can’t lower the interest rate.”


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