Financial Times

AG rules SLPA bunkering restrictions unlawful
The controversy over John Keells Holdings bunkering subsidiary, Lanka Marine Services', effort to retain a monopoly on bunkering in Colombo port despite liberalisation has taken a new turn with the Attorney General ruling that Sri Lanka Ports Authority's restrictions on rival firms could be unlawful.

The AG has informed the Public Enterprises Reform Commission (PERC), which carried out the privatization of LMS, that any refusal by the SLPA to allow other companies to sell bunkers in Colombo port could be a violation of their fundamental rights. PERC has conveyed this opinion to SLPA.

The dispute centres on a controversial clause in the LMS privatization deal that appeared to effectively restrict other players from supplying bunkers by compelling them to use storage tanks controlled by LMS.

Lanka Bunkering Services (LBS), a new associate company of Sri Lanka Shipping competing with LMS, has gone to court over what it alleges is an attempt by the JKH subsidiary to retain its monopoly, contradicting efforts to open up the market and reduce prices. LBS, a Board of Investment firm, has invested $15 million in the bunkering operation which is a 50:50 joint venture with the big US marine fuels firm, Chemoil Corporation.

In July it brought $9 million worth of bunker fuels in two ships but was prevented by SLPA from selling fuel to ships inside port, despite having a licence to do so from the Ministry of Power and Energy.

The SLPA cited LMS' privatisation agreement that appears to effectively restrict other players from supplying bunkers by forcing them to use LMS storage tanks and pipeline facilities operated by Ceylon Petroleum Corporation, known as the Common User Facility (CUF).

PERC has now informed SLPA that, according to the AG's opinion, the LMS privatization agreement cannot be interpreted to mean that SLPA is obliged to refuse other firms permission to transport bunkers in barges within port if they do not use the CUF.

"Such a refusal would be contrary to law," the AG has said. The Attorney General was asked whether bunkering could be done inside Colombo port without using the CUF and also without violating the government's contractual obligations under the LMS privatization agreement.

"Any refusal to permit other barge owners to transport bunker fuel by barge would be a violation of Article 12 (1) and Article 14 (1) of the Constitution," the AG has said. These articles guarantee the right to equality and deal with freedom of speech, assembly and movement.

The AG has also pointed out that LMS itself operates barges to transport fuel within port. Chemoil Corporation officials flew to Colombo for talks with the BOI last month and to protest against the restrictions on bunkering. Its LBS subsidiary made a few offshore sales of bunkers but stopped when the weather turned bad and the bulk of the two imported shipments were taken back to Singapore.

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