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CPC cautions Armed Forces, Railways on Rs.2 b debt

by Ravi Ladduwahetty

The Ceylon Petroleum Corporation has cautioned the three Armed Forces and the Sri Lanka Railways that it will have to stop credit facilities for the supply of petroleum products to these vital State institutions if they do not settle their outstanding dues which amount to Rs. 2 billion annually.

"We have given them constant reminders and if they do not settle these dues, supplies will have to be made only on payment. We cannot further burden the consumer with rising prices," Ceylon Petroleum Corporation Chairman Daham Wimalasena told the Daily News yesterday.

The rising prices of petroleum products could be cushioned if the Armed Forces and the Police pay their annual outstanding dues. The problem with the three Armed Forces and Sri Lanka Railways is that they have never attempted to settle the dues which has had a major effect on the prices of CPC products, mainly petrol and diesel. This is in sharp contrast to the Police Department which has been very consistent with their payments, the CPC Chairman said.

Commenting on the impact of rising petroleum prices, Mr. Wimalasena said that if every increase in the price of crude oil per barrel by one United States Dollar was not met by raising the local selling price immediately, the annual loss to the CPC was a minimum of Rs. 2500 million.

With the rise in the price of crude oil of one rupee against the Dollar, the annual losses to the CPC would be Rs. 1000 million if the prices are not adjusted.

Therefore, under the circumstances, all the CPC could do is to reduce its operating costs by creating competition between the two State banks - the Bank of Ceylon and the People's Bank by which method enables the CPC to reduce costs by Rs. 800 million, he said.

The Bank of Ceylon which always has better terms than the People's Bank has further reduced its rates to LIBOR + 0.75 which has resulted in the private banks also to reduce the rates further to LIBOR + 0.65. However, the People's Bank is yet to respond in that its rate is LIBOR + 2.5.

The delay or the non-payment of these bills has resulted in the CPC having to borrow more from the banks and the extra costs have to be pruned down which have to be recovered from the consumers.

The CPC also believes that it could save a further Rs. 500 million in bank charges annually if the defaulters pay up the dues.

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