Wednesday July 17, 2019

Sri Lanka's CPC loses Rs104bn as dollar soft-peg collapses

Mar 07, 2019 21:11 PM GMT+0530 | 3 Comment(s)

ECONOMYNEXT - Sri Lanka's state-run Ceylon Petroleum Corporation has lost 104 billion rupees in 2018, down from a 3.5 billion rupee profit a year earlier, with 82 billion rupees of the loss coming from a collapse of an unstable soft-peg with the US dollar, provisional Finance Ministry data showed.

This was the worst loss incurred by CPC, topping the 97.3 billion rupee loss in 2012.

CPC sales grew 14.6 percent from a year earlier to 521.5 billion rupees in 2018, while cost of sales cost of sales were up 27.1 percent to 524 billion rupees generating gross loss of 2.4 billion rupees, down from a gross profit of 43 billion rupees.

After sales and distribution expense of 14.4 billion rupees, and administrative expenses of 6.0 billion rupees, the petroleum utility posted an operational loss of 22.2 billion rupees, down from a 22.9 billion rupee profit a year earlier.

The firm then lost 82.7 billion rupees as the Sri Lanka rupee collapsed in 2018 with the Central Bank losing control of a soft-peg with the US dollar.

The Central Bank is operating a peg with multiple convertibility undertakings including a real effective exchange rate index, but also prints tens of billions of rupees within days to enforce artificially low interest rates or policy rate cuts, generating monetary instability.

In 2018, the rupee collapsed from 153 to 180 to the US dollar during two runs, initially triggered by actively printed money (liquidity generated from domestic asset purchases), and unsterilised liquidity and a Soros-style swaps, after a peg stabilized in August.

The CPC has large unsettled dollar borrowings, despite having rupee customers.

In the past, moral suasion has been brought upon the agency not to buy dollars and settle bills, despite having rupee balances in its accounts, according to insiders whenever the central bank generates instability in forex markets, but no one has been held accountable.

The petroleum industry in Sri Lanka is a duopoly, with CPC's only competitor being the Indian state-owned Lanka IOC Plc, which has an 18 percent market share.

From January to December 2018, Lanka IOC posted losses of 625.7 million rupees, down from 1.3 billion rupees a year earlier.

Lanka IOC had increased prices more steeply than CPC in 2018 to account for the currency and oil price hits. (Colombo/Mar07/2019-SB)




  1. RMB Senanayake April 01, 05:46 AM

    Why on earth is the CPC making losses when it does not subsidize the petrol price. Let the market prices free and if the CPC can't recover its costs it should be closed down and the distribution handed over entirely to the private sector with supervision by the government petroleum authority.

  2. Tilak March 08, 07:00 AM

    Our only refinery should have been upgraded to handle many type of crude oil, production capacity too should have been increased in order to cater to the increased fuel demand over many decades.The value addition locally surely would have saved foreign costs. Ins ted importing the finished product has been the solutions for a long long long time(Decades).In this context it maybe interesting to look for clues pertaining to the automatic triggering of that amazing autonomous system called the natural justice, which normally seems work on a first come first out basis.

  3. Abdul Hameed March 07, 08:29 AM

    Issue Tender for Crude Oil in Sri Lankan Rupees. Let the exporter hedge the currency against US dollar.It will be pricey but CPEC will not make losses.

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