News

India likely to extend $ 500 m credit line for fuel

  • GoSL optimistic about Indian Govt.’s approval
  • $ 3.6 b credit from Oman still in the works

By Shahaen Vishak

The Government of Sri Lanka (GoSL) is holding discussions with Indian officials to secure a $ 500 million credit line from India, to be used for the purchase of fuel and crude oil-related products, and is optimistic that these will prove fruitful within the next two weeks, The Morning learnt.

When asked about the progress of this deal, Finance Ministry Secretary S.R. Attygalle told The Morning that discussions were underway, but that it was not confirmed yet.

Speaking to The Morning, Energy Ministry Secretary K.D.R. Olga yesterday (17) stated that talks are ongoing towards this purpose and that since India has extended several credit facilities to Sri Lanka in the past, they are likely to agree to this one as well.

“India regularly provides credit lines to Sri Lanka, for infrastructure or for purchasing vehicles, and this is a similar credit line extension along those lines,” she explained.

She further stated that Sri Lanka had been unable to utilise around $ 400 million out of these existing credit facilities provided by India.

“We have been discussing this with the Indian High Commission as we are currently facing problems with our foreign reserves. We typically need around $ 300 million per month for fuel-related imports, and market prices have been rising. If we can secure this credit, it would provide some relief, as we are facing a difficult situation. Therefore, we have made the necessary arrangements in this regard, and it seems this will be successful; we should be able to secure the facility within two weeks. Discussions are still underway, but seem very promising.”

She further noted that if Sri Lanka is successful in securing this credit facility, it is likely that the credit would be used to purchase fuel and crude oil-related products as per the conditions set by India, as is typically the case in such agreements.

“Practically, if we secure the credit facilities from India, we will have to acquire the fuel from suppliers nominated by them, under the terms and conditions they specify.”

However, discussions have not proceeded to the stage where these conditions have been set forth, she noted, adding that these would still prove more favourable than attempting to acquire credit directly from fuel suppliers.

“We usually acquire fuel on a supplier credit basis, and if this is on a government-to-government basis, we can secure it at lower interest rates,” she commented.

Meanwhile, the Government is also engaged in a similar discussion with the Omani Government to secure $ 3.6 billion in funding to finance oil procurements.

The Sunday Morning, on 3 October, quoted highly-placed government sources as stating that both countries had agreed in principle to proceed with a programme under a five-year grace period and a repayment period spanning 20 years, with the relevant agreement to be presented for Cabinet approval within two weeks.

When asked about the status of this agreement Olga noted it was going through the standard procedure.

“The agreement hasn’t been signed yet because we first have to draw up the agreement with the approval of the Attorney General and Cabinet before it can be finalised.”

Meanwhile, Ceylon Petroleum Corporation (CPC) Chairman Sumith Wijesinghe had stated yesterday that the Government, including the Ministry of Energy and the Ministry of Finance, is currently discussing ways to provide relief to the people without raising fuel prices, through intervention to minimise the CPC’s losses.

Noting that the increase in global oil prices was not a controllable factor, Wijesinghe added that the CPC expects a solution from the Government if a local price hike is not possible.

With regard to questions over fuel stocks, he said that the fuel supplied to fuel stations and the fuel purchased by the consumers last Friday (15) and Saturday (16) had exceeded estimates, but apart from that he did not believe the Lanka Indian Oil Corporation (LIOC) had stopped issuing fuel, as there had been no such announcement thus far.