US dollar shortage burdens debt-ridden CPC

The debt- ridden Ceylon Petroleum Corporation (CPC) is heading towards an unprecedented financial crisis due to a dollar shortage in state banks to settle its fuel import payment bills when clearing shipments from the port.

The CPC had to face severe difficulties in clearing its recent crude oil shipment which arrived on July 5 at the port and another refined petrol cargo is expected on Thursday July 22, a high ranking Customs official told the Business Times.

The reason was the depletion of foreign reserves in two state banks and its inability show its US$ allocations for

LCs opened on behalf of CPC, he said adding that the corporation owed $ 3.3 billion to these banks.

The Central Bank cannot engage in dollar transactions at this moment and the banks cannot make commitments on behalf of the CPC under the present circumstances, the official explained.

A CPC source said that in a bid to strengthen the financial position, it is in the process of exploring the possibility of obtaining a long-term refinance facility of $1 billion from foreign markets.

CPC is planning to enter into government to government agreements to buy crude oil on long- term credit from oil producing countries like Saudi Arabia, Qatar, Kuwait, Oman, the United Arab

Emirates and Russia.

The aim is to import crude oil at concessionary rates under a special quota system with a long-term payment period, the source disclosed. The corporation is still paying for the oil imports for the first quarter of 2020, the source said.

Meanwhile a Treasury report said that the CPC’s total import cost of the petroleum products increased by 28 percent to around $894 million in the first four months of 2021, compared to $699 million in the same period of 2020,

In this context, persistence in fixed retail price has partly deteriorated the financial performance of CPC, with the entity incurring a gross loss of Rs. 8.2 billion in the first four months of 2021, compared to the gross profit of Rs. 8.4 billion recorded in the same period of 2020, the report revealed.

This trend led the CPC to end up with a net loss of Rs. 45.3 billion in the first four months of 2021.and the outstanding dues to CPC from various enterprises mainly from the Ceylon Electricity Board and SriLankan Airlines stood at Rs. 149.6 billion as at end April 2021.

Altogether, CPC reported accumulated retained earnings worth Rs. 382 billion as at end April 2021.

As a result, CPC’s outstanding borrowings from two state commercial banks increased this year to Rs. 670 billion as at end April 2021 from Rs. 529 billion as at the end of 2020.