Digital Desk: Sri Lanka’s state-owned petroleum company has run out of cash to buy oil, and fuel shortages could worsen in the coming days, announced Sri Lanka’s energy minister.
According to the energy minister, Udaya Gammanpila, the loss-making Ceylon Petroleum Corporation (CPC) continues to lose money and can no longer afford to buy supplies from overseas.
“Previously, we were unable to import oil due to a lack of dollars. But right now we don’t have enough rupees to buy dollars.” Gammanpila told reporters.
Notably, vehicles outside the capital have reported long lines at low-supply gas stations.
Meanwhile, several thermal power stations were forced to close on Friday afternoon due to a lack of fuel, prompting Sri Lanka’s energy utility to resume rotating power disruptions around the country.
Further, Gammanpila claimed that the CPC lost up to 42% on fuel sales at government-mandated pricing, with losses totaling 83 billion rupees ($415 million) last year.
“Even if oil sales taxes are reduced, it will not be enough to compensate our losses unless we raise prices or the Treasury grants a bailout.” he said.
The deepening foreign-exchange shortfall in Sri Lanka has significantly impacted the energy sector, which is entirely reliant on imports for its oil needs.
Due to a lack of furnace oil, thermal electricity generators have been shut down, resulting in unplanned power outages over the Indian Ocean island.
On the other hand, Sri Lanka is also facing food scarcity, with stores obliged to ration essential items like rice. Moreover, cement and automotive parts are also in short supply. Notably, food inflation hit a new high of 25% last month due to the shortages.
Moreover, Sri Lanka’s tourism industry, a major source of foreign cash, has fallen in the aftermath of the Covid-19 outbreak.
Last month, India provided temporary assistance to the neighbouring island by extending a $500 million credit line to cover oil needs for the next six weeks.
Since late last year, three international rating agencies have downgraded the island, citing concerns that it may be unable to service its $35 billion sovereign debt.
Sri Lanka has also asked Beijing for more loans to assist pay off its existing Chinese debt, which accounts for around 10% of the country’s total external debt.
Authorities have borrowed significantly from China in the past for infrastructure projects, some of which have turned out to be as expensive white elephants.
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