Sri Lanka to ask India's Reliance and Malaysian Petronas for Oil Supply Credit

Sri Lanka is to ask Reliance Industries of India and Petronas of Malaysia for extended credit on fuel purchases, to ease recent pressure on the exchange rate.

We will be requesting for extended credit for about three to six months from Reliance and Petronas because of the difficulty of the central bank in raising foreign exchange (to pay for purchases),� a top official with state run oil giant, Ceylon Petroleum Corporation, told LBO on Tuesday.

Sri Lanka currently buys refined products from Reliance through spot tenders on the world market, but Ceypetco says Reliance has been offering the best premiums in the past few months.

Negotiating for extended credit on oil bill payments, may also include Ceypetco tying up with Reliance for a longer term contract to buy refined products.

�It would be beneficial for us to go in for a longer term contract because they have become the lowest for prices in the past few months. It is very probable that they are among the best suppliers in the region,� the official said.

The island buys three to four shipments, of about 40,000 metric tonnes each, of refined products petrol, diesel and kerosene, each month or a total of 3.4 million metric tonnes a year.

An oil dependant country, Sri Lanka also imports 2.2 million metric tonnes of crude oil a year, 70 percent of which is from Iran, 20 percent from Saudi Arabia and 20 percent from Malaysia.

A team from Reliance Industries of India is due in the country in a week for discussions with the Treasury while Ceypetco will also be making a formal request to Petronas of Malaysia.

Sri Lanka expects to pay two billion dollars for oil this year, up from 1.6 billion dollars last year. The local retail fuel market is split between Ceypetco and Lanka Indian Oil Corporation.

Meanwhile, the government is also considering offering targeted subsidies for kerosene to Samurdhi beneficiaries, while allowing Ceypetco to sell at market rates, an official said.

Currently, kerosene is sold at 48 rupees a litre, well below the actual cost of 61 rupees.

The government recently removed fuel subsidies allowing both retailers to set rates, with a recent study by the International Monetary Fund showing that 74.9 percent of Sri Lanka�s fuel subsidies reached 60 percent of the highest income classes.

Lanka Everything