Sri Lanka’s Cabinet of Ministers has approved debt-ridden state-owned Ceylon Petroleum Corporation (CPC) to develop 24 oil tanks in the country’s China Bay tank farm in Trincomalee through its funding, Cabinet Spokesman Nalinda Jayatissa said.
The CPC is one of the top loss-making state-owned institutions though the country’s treasury has taken over its debt.
The CPC has long faced financial instability due to accumulated debts, foreign exchange shortages, and inefficiencies in pricing and management.
Out of 99 tanks in Trincomalee China Bay oil tank farm, the CPC will develop 24 tanks.
“…the Cabinet of Ministers has approved the proposal presented by the Minister of Power and Energy to implement the proposed project by the fund of the Ceylon Petroleum Corporation without burden to the General Treasury,” the government said in its cabinet decisions.
It said as per provisions of an agreement signed in January 2022 to establish Trincomalee Petroleum Terminal Company Limited (TPTCL) between CPC and Lanka IOC, 24 tanks at the Upper Tank farm in Trincomalee had been leased to the CPC for 50 years from the date of commencement of the agreement.
TPTCL, a joint venture between the CPC and LIOC, has 61 tanks under the agreement.
The CPC had planned a three-year project and conducted initial project activities, including a feasibility study with the objective of completion of the development of the 24 oil tanks within the time period.
However, the project faced a delay due to the financial crisis, which was partially contributed by CPC’s past mismanagement under successive governments.
As of 2024, CPC’s outstanding liabilities exceeded $3 billion, largely due to loans taken for fuel imports and unpaid dues to suppliers, including major international oil traders.
The company has struggled to maintain financial viability, primarily due to selling fuel at subsidized rates in the past, which resulted in significant operational losses.
While the government has taken steps to reduce losses through fuel price revisions based on a cost-reflective pricing formula, CPC’s overall debt burden continues to strain its operations.
The company has suffered from foreign exchange shortages, which have hindered its ability to procure fuel consistently, especially during the 2022 economic crisis when long queues formed at filling stations due to supply disruptions.
Former Energy Minister Kanchana Wijesekera had said the Treasury took over Rs.1200 billion ($3.4 billion) worth of CPCs debt in 2022 and imposed a Rs,25 per litre tax initially and increased it in 2023 to Rs,50 per litre tax to recover the debt by 2029.
When asked by Cabinet Spokesman Jayatissa on how will CPC finance the development of the tanks, he said it was not mentioned in the cabinet paper.
“These (tanks) are owned by the CPC. These will be developed with the money from CPC. The (Cabinet) paper is only to get cabinet approval,” Jayatissa said.