S. Talpahewa, Former Chairman/Managing Director, Ceylon Petroleum Corporation. Courtesy The Island

April 24, 2017, 10:03 pm

Dr. Dayan Jayatilleka in his article, “Ranil’s worst betrayal: Giving Trincomalee to India”, implies that Prime Minister Ranil Wickremesinghe has betrayed the country at least twice before, i. e. one a bad betrayal and two a worse betrayal. Whatever it may be, his betrayals have affected the country immensely. The country’s ills are the creations of politicians. The Ceylon Petroleum Corporation (CPC) has suffered the most at the hands of politicians. CPC, once a very well managed Government Institution was one time dubbed the “Thug Corporation” as a result of thugs taking control of the CPC with the change of a government, and the appointment of thugs to the Board of Directors by the then minister in charge of the CPC, who himself was considered by some to be a thug. I am not going into details of the CPC, but suffice to say it was created under the provisions of a Parliamentary Act.

In 2002, the then incumbent Prime Minister Ranil Wickremesinghe, together with a team of advisors, which included the then incumbent Chairman of CPC and the line Minister, visited India. I was told that several matters pertaining to the two countries had been discussed by the relevant parties, and when the question of the petroleum industry/trade came up for discussion the Indian authorities had shown their keen interest in taking over the Sri Lankan petroleum industry/trade lock stock and barrel, and the Sri Lankan Prime Minister was willing to accede to the suggestion of the Indian authorities. However, the Chairman CPC of the time had vehemently protested against the proposal put forward by the Indians and almost accepted by the Sri Lankan Prime Minister without any reservations. The CPC Chairman had the support of the line minister, I was told. The result was the Indians failed in their attempts to grab the Sri Lankan petroleum industry/trade in its entirety.

Nevertheless, in the guise of liberalization of the petroleum business in the country, and the concerned players of the game playing the game on a “level playing field”. The Sri Lankan government handed over one-third (i/3rd) of the petroleum business in Sri Lanka to Indians, thereby removing the monopoly enjoyed by the CPC. That was in 2002. In February 2003, CPC had entered into a Memorandum Of Understanding with the Indian Oil Corporation to lease out to Indians the China Bay Tank Farm consisting of 99 tanks of 10,000 metric tons capacity each, for a period of 35 years with the condition that within six (6) months from the date of the MOU that a legally valid contract had to be entered into by the two parties for that purpose, for the proposal to be binding on both parties. The Indians had taken over the China Bay Tank Farm from CPC after signing the MOU, but had failed or wilfully avoided ato comply with the aforesaid condition, thus making the MOU invalid and also their holding on to the China Bay Tank Farm illegal.

In the meantime, with a view to overcoming a possibility of a shortage of fuel due to lack of storage facilities, Minister of Petroleum and Petroleum Gas and Minister of Power and Renewable Energy had submitted a joint proposal to the Cabinet requesting that 16 Oil Tanks from the China Bay Tank Farm to be vested totally with the CPC, three of them to be taken over immediately and the rest within three months.

The proposal had been approved by the Cabinet. When CPC Engineers, on the instructions of the Chairman CPC, visited the China Bay Tank Farm to implement the Cabinet decision they were not allowed to enter the Tank Farm by the Indians.

The Cabinet Memorandum submitted by the Minister of Petroleum and Petroleum Gas to the Cabinet on 28-04-2016 had been approved by the Cabinet on 24-05-2016. In the said Cabinet Memorandum it had been pointed out that the Indian Oil Corporation had no legal right to claim ownership to the Tank Farm, and the Cabinet had approved the proposal to repair 16 tanks for the use of the CPC. By a Cabinet memorandum submitted by the Prime Minister on 06-06-2016 he had requested the Cabinet to rescind the aforesaid Cabinet decision and to hand over the China Bay Tank Farm to the Indians.

It is reported that the LIOC is not playing the game on a “level playing field”. The relevant clause of the agreement signed by the LIOC and the Sri Lanka government stipulates that “LIOC as one of the three players shall jointly and severally ensure that the Three players will together maintain at least 95% of the total throughput volume of Petroleum Products of the country including Aviation fuel through the CUF”, which means only 5% of the throughput volume can be routed through other installation. It is alleged that the LIOC had already violated this condition by marketing more than 5% of their sales volume through the China Bay Tank Farm and had thereby got an enormous advantage over the CPC.

The pricing formula for petroleum products is based on products being imported through the Colombo Port and marketed via the CUF (CPSTL). Various cost components are passed on to the consumer as the formula guarantees a profit margin to the operator. Number of items built into the pricing formula is non-existent for operations through the China Bay Tank Farm and some of the costs are lower than those calculated for operation via CPSTL. For example Jetty and pipeline charges and Port Development Levy are not applicable to the China Bay Tank Farm. As per the relevant agreement, the LIOC is entitled to market only 1/3rd of 5% of total throughput via China Bay Tank Farm.

The details given above are only a few. Several other items, disadvantageous to the Sri Lankan government if Prime Minister Ranil Wickremesinghe’s proposal to hand over the China Bay Tank Farm to Indians is implemented, and can be highlighted if necessary.

S. Talpahewa,

Former Chairman/Managing Director,

Ceylon Petroleum Corporation.