Financial Times

Ceypetco's future unclear
There is absolute confusion over the government's position on the further privatisation of the Ceylon Petroleum Corporation (Ceypetco) and the entry of a third player into the petroleum fuel retail business.

Two ministers reportedly hold different views with Power and Energy Minister Susil Premajayantha insisting the corporation would not be privatised and claiming the Cabinet has approved that position while Finance Minister Sarath Amunugama says the government has not given up its intention of selling off a further stake in Ceypetco.

Even the nature of the changes that are contemplated is not clear. For instance, the government says it would retain a majority stake in the retail company that would take over 107 Ceypetco sheds. What is not so well known to the public is that the third player would have one-third stake in the storage terminals, which along with the existing one-third share owned by Indian Oil Corporation, effectively means that it would be beyond the control of Ceypetco. Furthermore, even in the retail marketing firm that will run the 107 filling stations where the government would retain 51 percent and sell 49 percent to the third player, the third player would have full management and operational control. There is nothing to prevent the third player or IOC from buying more privately owned retail outlets. This, as the unions have warned, would squeeze Ceypetco out of the retail business and seriously reduce its earnings.

While corporation employees would no doubt at least be partly driven by a desire to retain the perks and privileges they now enjoy as a government entity, perhaps most importantly the fact that many of them do not have to work hard, they also have genuine concerns about the fate of a national enterprise which should not be dismissed as mere political rhetoric or a result of self-interest.

A good example of double standards and an attempt to hoodwink the public by politicians is the manner in which they have taken to blaming state-owned enterprises such as Ceypetco and the Ceylon Electricity Board for the difficulties in which these entities find themselves. They have taken to using these criticisms as justification for privatisation. This is unfair because it is the politicians themselves who are responsible for ruining these enterprises - by stuffing their ranks with supporters who are usually not qualified, who abuse their positions and generally live off the corporations, and by interfering with what should be commercial decisions.

Even today there are reports that recruitment to Ceypetco is still taking place despite it being hugely overstaffed. These politicians conveniently forget, or to be more accurate, ignore or try to divert attention from, the fact that the troubles of our state enterprises have largely been caused by politicians themselves and the way they have interfered in the running of these organisations. It is, therefore, the politicians who have to take the blame for the mess organizations like Ceypetco and CEB find themselves in. It is the politicians who have turned these organisations into monsters devouring public funds.

The role of the Strategic Enterprises Management Agency in the restructuring of Ceypetco is also not clear. If SEMA is indeed supervising the reforms that are expected to make Ceypetco into a more dynamic, commercially viable enterprise, more responsive to the needs of its customers, the requirement for a third player might not arise.

Competition certainly can help give consumers a better service, as we have seen with the entry of IOC in the fuel retail business. However, the government should consider carefully whether it wants to lose control over such a vital activity as the petroleum business.

Back to Business