Sri Lanka Government Vows to Strengthen State Role in Energy Sector, President Says

Colombo, The Gulf Observer: President Anura Kumara Dissanayake has reaffirmed the Sri Lankan Government’s commitment to maintaining a strong state presence in the energy sector while improving the efficiency of state institutions and ensuring reliable services for the public.

The President made the remarks on October 2 while attending the commencement of construction of a Jet A-1 fuel pipeline system of the Ceylon Petroleum Corporation (CPC) and two new oil storage tank systems belonging to CPC and the Ceylon Petroleum Storage Terminal Limited (CPSTL).

Addressing the ceremony, President Dissanayake said Sri Lanka’s energy sector requires a well-planned and forward-looking strategy, noting that state institutions had previously faced financial difficulties and declining public confidence.

He said CPC had accumulated debts of around Rs. 840 billion, placing considerable pressure on the state banking system and contributing to calls for the sale and privatisation of state-owned institutions.

Despite Sri Lanka’s relatively small energy market, the Government believes the state must retain a leading role in the sector due to its importance to the country’s economy and social well-being, he said.

The President, however, stressed that continued state involvement must be accompanied by greater efficiency and the delivery of services that meet public expectations.

He said the Government had ended the previous practice of politically motivated recruitment to state institutions, with recruitment now restricted to essential personnel required for specific projects.

President Dissanayake noted that CPC recorded a profit of Rs. 36 billion last year, while CPSTL posted a profit of Rs. 3.5 billion. CPC has already recorded a profit of Rs. 28 billion during the current year, he added.

The President identified national energy security as the next major challenge, pointing out that the country’s existing fuel storage capacity is sufficient for only about 23 to 25 days.

He said projects are being implemented to expand pipeline networks, reduce fuel unloading times and increase national storage capacity to at least 45 days. Construction of a new storage tank system with a capacity of 104,000 cubic metres has already commenced.

President Dissanayake also highlighted the impact of global developments on domestic fuel prices. He said the international price of refined diesel had increased from US$80 to US$170 per barrel, while petrol prices had risen from US$70 to US$136 per barrel.

Against this backdrop, the Government decided to distribute the impact of higher global fuel prices among consumers, suppliers and the Treasury rather than transferring the entire burden to the public, he said.

Accordingly, the Treasury provided a fuel subsidy of Rs. 60 billion over five months from April, covering Rs. 100 per litre of diesel and Rs. 20 per litre of petrol.

Following another increase in international fuel prices in September, the Government raised the domestic price of diesel by Rs. 10 per litre with effect from October 1, while the Treasury is bearing the remaining Rs. 70 of the increase that would otherwise have been reflected under the pricing formula.

The President said the Treasury had allocated an additional Rs. 41 billion for fuel subsidies for October, November and December.

He emphasised that CPC and CPSTL should not sell fuel below cost, adding that any difference resulting from a Government decision to maintain prices below cost should be borne by the Treasury.

President Dissanayake also highlighted the contribution of fuel supplied to ships and aircraft to the country’s foreign-exchange earnings. He said Sri Lanka had earned US$384 million so far this year from supplying fuel to aircraft.

He further announced that an US$800 million project is scheduled to commence in November to expand passenger-handling capacity at Katunayake Airport by an additional 10 million passengers, on top of its existing capacity of 11 million passengers.

The newly launched Jet A-1 pipeline project will enable aviation fuel to be supplied directly through a pipeline, replacing the use of bowsers, the President said.

He also pointed out that the existing general fuel subsidy disproportionately benefits owners of vehicles with higher fuel consumption.

In this regard, discussions will be held next week with the Ministry of Digital Economy to develop a digital mechanism for directing fuel subsidies towards sectors with genuine requirements, including public transport, agricultural machinery, fishing vessels and lorries transporting vegetables.

President Dissanayake expressed appreciation to the chairmen, boards of directors, management and employees of CPC and CPSTL for their contribution and called on all stakeholders to work collectively towards building a more efficient, reliable and sustainable energy sector.