• CPC market share rises to 82% as private firms scale back
• Fuel dealers warn shortages could persist over pricing dispute
• Opposition, TU call for abolishing agreements with private firms 
• Special Energy Ministry, CPC, President discussion today

The Government has moved to prevent further fuel shortages by instructing private fuel distributors to maintain uninterrupted supplies and minimum fuel stocks, as reduced deliveries by three companies have triggered queues at filling stations across the country.

Energy Minister Anura Karunathilaka said the Ministry Secretary was expected to issue a written notification to the relevant companies yesterday (6), directing them to ensure uninterrupted fuel distribution amid the current situation.

He said the Government was aware of the disruption caused by reduced supplies from the Lanka Indian Oil Corporation (LIOC), Sinopec and RM Parks Private Limited, which the companies have attributed to losses incurred from selling fuel at current domestic prices amid a sharp rise in global fuel prices.

Responding to a question raised by Opposition Parliamentarian Nalin Bandara Jayamaha in Parliament yesterday, Karunathilaka said the Ministry did not have the authority under the existing agreements with private distributors to order them to release specific quantities of fuel to filling stations.

However, the companies could be directed to maintain minimum fuel stocks in the country, he said.

Fuel queues have been reported at filling stations in several areas, with motorists claiming that some stations have fuel, including Octane 92 petrol, but are not releasing it to customers.

Jayamaha said private distributors were not supplying filling stations the quantities they had ordered.

“If a filling station orders five fuel bowsers a week, they are given only one. Naturally, this has created a fuel shortage at filling stations operated by private fuel distributors,” he said.

He questioned why the Government was allowing the situation to continue if private companies were restricting supplies because they were incurring losses, and whether their agreements could be cancelled and the companies brought back under State control, as stated during the National People's Power election campaign.

Karunathilaka said international fuel prices had risen sharply in recent months, making it difficult for private companies to sell fuel at the prices currently in force.

He said the price of a barrel of diesel had risen from about $88 in February to $156 in August and around $178 in September.

“These companies are saying that they cannot sell at the current prices in Sri Lanka. But, we don’t have the ability to increase the prices in line with that increase. As a result, the companies have restricted the quantities that they are releasing to the market,” he said.

He said LIOC had reduced its auto diesel supply by 45% compared to February, super diesel by 87% and Octane 92 petrol by 3%. Sinopec had reduced its diesel supply by 66% and Octane 92 petrol supply by 30%.

In contrast, the CPC had increased its supplies to compensate for the shortfall. Diesel supplies were up 27% compared to February, super diesel 44%, Octane 95 petrol 7% and Octane 92 petrol 9%.

“This has placed an additional burden on the CPC,” Karunathilaka said.

“What we can do in this regard is to have the CPC bear this burden,” he said, noting that the CPC's share of diesel supplied to the market had increased from around 54% previously to 82% at present.

“The CPC currently holds an 82% share of the market,” he added.

However, Karunathilaka said the Government could not direct private distributors to release specified quantities of fuel to filling stations under their existing agreements.

“Under these agreements, we have no ability to order them to release fuel to filling stations in a particular manner. What we can do is issue certain directions to maintain minimum fuel stocks in Sri Lanka,” he said.

He said the Ministry Secretary had last week issued a notice to a company that had failed to maintain the required minimum stocks, while relevant companies had also been notified to ensure minimum fuel stocks were maintained.

Karunathilaka said the Ministry Secretary had informed the companies on 5 October to take steps to prevent shortages. The companies had particularly restricted supplies during the previous two days, while fuel is generally not released to the market on Sundays, contributing to the impact seen on Monday (5), he said.

“Private companies also don’t provide fuel on credit, unlike the CPC, which supplies fuel on credit with payments scheduled three days later. We believe that as the CPC is taking on this additional burden, the situation will ease to some extent by tomorrow (7) or 8 October,” he said.

Meanwhile, necessary instructions have been issued to increase fuel supplies to CPC-operated filling stations.

A special discussion on the issue is scheduled for today (7), with officials from the Ministry and CPC expected to attend along with President Anura Kumara Dissanayake.

Meanwhile, Petroleum Dealers' Association Deputy Chairperson Kusum Sandanayake said the Association was urging the Government to provide an immediate solution to the issue.

The Association had warned on 17 September that a fuel shortage could emerge if the pricing issue was not resolved. Association Chairperson D V Shantha Silva said motorists had been seen queuing at filling stations in several parts of the country on Monday due to a lack of fuel.

However, he said the Association had been informed that the situation was not due to an overall shortage of fuel, but was linked to losses incurred by LIOC, Sinopec and RM Parks on petrol and diesel sales.

Although the Government had introduced a subsidy, the three companies continued to consider the existing pricing structure loss-making, Silva said. This had resulted in the companies reducing the frequency of fuel orders, despite placing orders for supplies, he added.

He said shortages were currently being observed at filling stations operated by the three companies, while such shortages were not expected at CPC stations. However, he stressed that shortages at any filling station could be avoided if the companies received their ordered fuel supplies on time.

The three companies had recently informed filling station operators that they would have to restrict fuel distribution as they were being compelled to sell fuel at prices below their purchasing cost.

The Government subsequently increased fuel prices during the latest fuel price revision and introduced a subsidy for each litre of diesel, taking into consideration the concerns raised by fuel distributors.

Meanwhile, Podujana Progressive Employees' Union representative Bandula Saman Kumara said the existing pricing system required fuel prices to be determined on the first day of each month, with the CPC and other fuel companies required to sell at those prices during the month.

He claimed that the companies had already imported the required fuel and stored it at facilities in Kolonnawa, Sapugaskanda and Muthurajawela, and were therefore required to sell those stocks at the prescribed prices.

Kumara questioned the rationale for retaining private companies in fuel distribution if they were unwilling to continue supplying the market under the prevailing pricing system.

He also questioned whether the original justification for bringing private companies into the sector, namely saving foreign exchange reserves, remained valid if the CPC was now increasing its market share to compensate for reduced private-sector supplies.

“The CPC is selling their share as well, so the dollars required for that have to come from the CPC and the Treasury, don’t they?” he said.