ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation used to maintain two to three weeks of stocks before a currency crisis intensified, but it has now fallen to 5 to 6 days leading to stock outs at filling stations an official said.
“Though there were speculation of fuel shortages for about six months, with the help of central bank and Bank of Ceylon and People’s Bank it we have come this far,” Secretary to the Ministry of Energy K D Olga, told the Sri Lanka’s Hiru Television.
“But now it has come to a decisive point.”
The daily demand for diesel for transport, factories and a Sojitz diesel power plant was about 6,000 metric tonnes a day.
However it has now shot up to about 9,000 Metric tonnes a day, with heightened demand from the power sector, Olga said. The CEB is trying to conserve water in hydro storage in the drought season running up to May.
After cancelling coal plants Sri Lanka has has run into power cuts in the past.
The West Coast Power plant (which is used to run on fuel oil) alone needs 1,000 metric tonnes a day, she said.
“The increased use of generators has also driven up demand,” she said. Many private customers are using generators during power cuts, imposed to reduce generation on the grids and save water during the night peak.
CPC is now running with low levels of stocks with foreign exchange shortages delaying the unloading of ships.
Olga said procurement was being done based on projections and the ships were arriving on time.
Sri Lanka is experiencing severe forex shortages due to money being printed to maintain low rates. Now money is mostly printing money after giving reserves (sterilized interventions) to keep the policy rate at 6.5 percent, driving up cascading credit.
“About six months ago we had stocks for 15 to 21 days,” she said. “When the Norochcholai coal plant broke down we found it difficult to maintain stocks.”
“Now we have stocks for about 5 to 6 days.”
The CEB is using diesel to generate power with hydro having been depleted during the previous months due to no permission being given for daily power cuts.
On Saturday, a petrol tanker with 37,500 MT had arrived in Colombo. However its unloading was delayed with foreign exchange shortages.
Olga said on February 21 night that the ship was being unloaded.
On February 22, foreign exchange for the diesel ship was expected, she said.
Daily petrol demand had risen to around 3,800 to 4,000 MT from around 3,200 to 3,500 earlier, she said. Higher petrol demand was partly due to people using more private vehicles to avoid Covid.
Over the past week, there petrol sheds from various locations ran out of petrol or diesel. On Monday many sheds ran out of diesel, but most had petrol.
Due to the need to keep at least 3 days of stocks, CPC was limiting issues, Olga said.
“The CPC is forced to limit the issue of petrol to conserve stock,” she said. “But this is not to keep stock and make profits after a price hike.”
The CPC had earlier bought oil on credit, when the central bank printed money and created forex shortages, but now all shipments have to be paid before they are unloaded.
Earlier stocks were bought on credit up to one year, she said. (Colombo/Feb22/2022)