More blows to Lanka: UAE fuel supplier imposes credit squeeze

Others also may follow suit as Govt suspends loan payments

Sri Lanka has run into further crisis in fuel purchases with the Ceylon Petroleum Corporation ( CPC) facing a credit squeeze from one of the major suppliers from the United Arab Emirates, a senior CPC official said yesterday.

Similar situations were expected from other suppliers in the coming months after the Government announced its decision to suspend the payment of foreign loans until further notice, pending negotiations.

He said a key UAE supplier, who had proposed the supply of six shipments with 95,000MT of crude oil each and had earlier agreed to grant credit for 200 days, has now limited it to 80 days. “We were expecting the crude oil to maximise performance of the Sapugaskanda refinery, but the plans will be disrupted now," he said.

The supplies were expected to enable the refinery to operate for six months. This was a cheaper option than importing diesel for the generation of power.

He said a proposed purchase with a Singaporean company to supply 95,000MT of crude oil too had been postponed earlier due to a delay in opening the required letters of credit.

A request made from China to supply finished products too has so far not drawn a response. The contract lapsed in December last year.

A senior Treasury official told the Sunday Times that the decision to suspend repayment of loans would also affect the proposed purchases from Saudi Arabia, Kuwait and Oman.

He said that due to CPC's delays to make use of the USD 200 million Indian credit line the chances of expediting the imports from India too had been delayed.

Meanwhile, fuel stations across the country continued to face shortages with long queues for diesel, petrol and kerosene.