Fuel supplies will be cut : CPC warns SriLankan

Wednesday deadline to pay at least Rs. 1 billion of the arrears of Rs. 14 billion; Airline says operations may grind to a halt

The country’s national carrier SriLankan Airlines will lose its fuel supplies from Wednesday if it does not pay up a billion rupees before the deadline, the state owned Ceylon Petroleum Corporation (CPC) has warned.

The amount, from an outstanding Rs 14 billion, is needed by the CPC which is locked in another payment controversy with the Inland Revenue Department. Last week, the IRD froze the bank accounts of the CPC after it failed to pay up the Value Added Tax (VAT) totalling Rs 1.5 billion for the purchase of petroleum derivatives. The action came with the concurrence of the Treasury and was temporarily settled with the CPC paying Rs. 500 million.

The CPC has also informed the Ministry of Transport and Civil Aviation and the Presidential Secretariat of its decision to cut off fuel supplies to SriLankan.

SriLankan Airlines officials expressed concerns over the CPC move and warned that the airlines' operations would grind to a halt with the cancellation of flights.

The acceptance of Rs 500 million by the Inland Revenue Department came following Petroleum Ministry Secretary Upali Marasinghe's appeal to the Prime Minister’s Office.

He has obtained approval for a further payment of Rs 262 million within a month.

CPC Chairman Dhammika Ranatunga told the Sunday Times the Corporation had informed the IRD that the arrears would be paid, but the Department had gone ahead to freeze the accounts interrupting fuel purchases and payments.

"If the CPC also takes stern action to collect arrears, several state institutions such as the Ceylon Electricity Board too could be affected," he said.

The chairman said the Treasury itself had to give the CPC US$ two billion for the losses incurred in view of price adjustments made at the request of the Treasury over the past 10 years.

Mr Ranatunga said that in future the CPC would also maintain a strict policy regarding overdue payments.

A senior IRD official said the department was empowered to freeze accounts for non- payment of dues and would continue to freeze accounts if arrears were due.

A senior Treasury official said permission was given to the IRD to freeze the CPC accounts as it had not at least made an appeal to make the payment in installments. “It carries out transactions for more than Rs 500 billion annually and, therefore, it could have made that payment," he added.

The CPC has to collect unpaid dues amounting to Rs 70 billion, including Rs 46 billion from the CEB and Rs 14 billion from SriLankan Airlines.