‘CPC Privatisation’: The untold story


By S. Talpahewa

Formerly of Ceylon Petroleum Corporation

I refer to news items appearing in your newspapers of the 15th and 16th instant and also the news item published in the "LankaeNews" dated the 7th instant. "LankaeNews" news item refers to certain comments alleged to have been made by Minister Susil Premajayantha, at a meeting held at his office, referring to a "Crude Oil Corporation" obviously meaning the Ceylon Petroleum Corporation (CPC). The Minister is alleged to have expressed his intention to "eliminate" or "terminate" the CPC and to form a new Company to take over 107 filling stations presently operated by the CPC. It is also alleged that the Minister had also stated at the said meeting "that no monies can be paid to the Banks on the hedging deal as the Crude Oil Corporation (CPC?) is bankrupt". The Minister is also alleged to have stated that after having published a gazette notification of the bankruptcy of the Corporation, "the Corporation is starting a new company".

In the news item dated the 15th instant (The Island) reference had been made to certain claims made by the Opposition that the "Ceylon Petroleum Corporation was to be privatized". In the same news item reference had been made to certain comments made by the Media Spokesman of the UNP Gayantha Karunathilake at a news conference held in Colombo that "the Mahinda Rajapaksa regime, which had pledged not to privatize any state venture, was on the verge of violating yet another of its election promises". In the said press briefing reference had also been made to "traitors" and "worst type of traitors". Mr. Karunathilake had also stated that when UNP "assumed power in 2001, the CPC had suffered a loss of Rs.38, 000 million and had no choice but to offer 33% each to the LIOC (Lanka Indian Oil Corporation) and Treasury".

According to the news item dated the 16th instant (The Island), Minister Susil Premajayantha has denied the allegations made by the UNP Spokesman Gayantha Karunathilake and added that "the government will not privatize the Ceylon Petroleum Corporation (CPC)". The Minister had also stated that it was the Ranil Wickremesinghe government that brought the Indian Oil Corporation to the local market and planned to hand over 107 filling stations to the private sector.

However, Minister Susil Premajayantha had not yet denied the allegations contained in the "LankaeNews" news item as referred to above. I believe in the interest of the CPC a clarification in that regard too should be made.

I, as a former employee as well as a former Chairman/Managing Director of the CPC, believe that I am morally obliged to put the record straight and clear any misunderstanding created by UNP Spokesman’s comments and the denial thereof by the Minister of Petroleum Industries Susil Premajayantha.

The entry of the Lanka Indian Oil Corporation (LIOC), a subsidiary of the Indian Oil Corporation, to the local market was the result of a decision taken by the Ranil Wickremesinghe government. The then government selected LIOC, without even resorting to any Tender procedures, to sell them one third of the CPC assets and how and why LIOC was selected to be a local competitor to the CPC in that manner still remains unanswered. UNP Spokesman’s assertion that the then government had no choice but to offer 33% of the CPC to LIOC as CPC had suffered a loss of Rs.38,000 million cannot be substantiated by any stretch of imagination. The following facts will put the record straight.

The then Minister of Power & Energy Karu Jayasuriya, while seeking approval for the "liberalization of the Petroleum Sector in Sri Lanka" as per his Cabinet Memo No.94/2002/PE – Ministry Ref. No.PE/EN/CPC/119 – dated 21st August, 2002, had stated inter alia:

(1) "The privatization of Petroleum sector in Sri Lanka so far has resulted in the substitution of a state

monopoly with a series of private sector monopolies. A policy of liberalization is a significant

improvement on a policy of privatization. Liberalization implies an element of competition

while privatization does not necessarily result in competition.

(2) The entry of the Indian Oil Company (IOC) into Sri Lankan market is welcome. They would

develop underutilized facilities in Trincomalee and is also very likely to be a cheaper source

of supply of Diesel and jet fuel which Ceylon Petroleum Corporation (CPC) now imports in

increasing quantities. It will be necessary that the new entrant is not given a predominant

position in the sector, which would weaken the CPC to a great extent and also discourage other

competitors entering the Market. We should not repeat the mistakes of the past".

The then Minister had requested Cabinet approval for:-

(a) "Kolonnawa Terminal, Bulk Depots, Airport Terminal, Muthurajawela Terminal and all Pipelines to be included in a single Terminal Company in which CPC will have initially majority shares and IOC and other new entrants to the Market brought into the Company when appropriate. CPC will ultimately have only 1/3rd ownership.

(b) Form CPC into a Govt. Owned Public Company like Sri Lankan Airlines, to operate the Refinery and 1/3rd of Retail Outlets.

(c) CPC, IOC and a 3rd player to be selected to compete in a level playing field with a strong regulatory authority in place.

(d) Sell bowser fleet and the Garage to two or more local companies, through a

transparent process.

(e) Authorize a Voluntary Retirement Scheme for excess staff".

It is noteworthy that the then line Minister had requested for Cabinet approval - (d) above) - to sell the bowser fleet and the garage of the CPC to two or more local companies through a "transparent process", having already selected the Indian Oil Corporation to sell them 1/3rd of the CPC assets without following a process of any transparency and that too without agreeing on a price for the assets.

Nowhere in the Cabinet Memo in question had the then line Minister Jayasuriya mentioned that the then government had no choice but to offer 1/3rd of the CPC to the Indian Oil Corporation due to the losses suffered by the CPC as asserted by the UNP Spokesman, Mr. Karunathilake.

Contrary to the assertions of Mr. Gayantha Karunathilake, UNP Spokesman, that the CPC had suffered a loss of Rs. 38, 000 million during the material period, the audited accounts of the CPC for the year 2002 had revealed a turnover of Rs. 80.1 billion as against a Rs.74.35 billion turnover for the corresponding period a year ago while the Gross Profit for the year 2002 was Rs.12.9 billion, up from the Rs.11.6 billion the previous year. The post tax profits of the CPC for the same period was Rs.9.7 billion over the Rs.1.5 billion the previous year. CPC had paid Rs.2.3 billion to the Treasury as deemed dividends during the same period.

Despite those achievements by the CPC, the government at the time decided to "liberalize" the Petroleum sector of the country, in the process offering on a platter the best run 100 filling/service stations in the country free of litigation and with large extents of land for development, together with 1/3rd ownership of the whole infrastructure for Petroleum in Sri Lanka as a Common User Facility (CPSTL) to the Indian Oil Corporation without even agreeing on a price.

From the above facts it is clear that the statement made by the UNP Spokesman, Mr. Gayantha Karunathilake, as aforesaid was without any foundation and was not factually correct. I am, nevertheless, not competent enough to comment on his remarks, viz., " and "worst type of traitors".

animated gif
Processing Request
Please Wait...