Purchase of bunker fuel for the Hambantota port has stopped as it had incurred losses amounting to US$16 million since it commenced operations in June 2014. Newly appointed Sri Lanka Ports Authority (SLPA) Chairman Dr Lakdas Panagoda speaking with the Business Times said bunkering at the Hambantota incurred losses. The authorities found that bunkering was [...]

The Sunday Times Sri Lanka

Hambantota port explodes with thumping losses in bunker fuel sale

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Purchase of bunker fuel for the Hambantota port has stopped as it had incurred losses amounting to US$16 million since it commenced operations in June 2014.

Newly appointed Sri Lanka Ports Authority (SLPA) Chairman Dr Lakdas Panagoda speaking with the Business Times said bunkering at the Hambantota incurred losses.

The authorities found that bunkering was started without studying the subject carefully with a bank facility of $30 million for the sole purpose of purchasing bunker fuel.

As a result the SLPA has stopped the purchase of any further bunkering fuel for the present, Dr Panagoda said.

It is learnt that though the Colombo port has about four companies involved in the sale of bunker fuel namely John Keells Holdings, McLarens, Sri Lanka Shipping and Indian oil Company (IOC), the Hambantota port bunkering business is said to be carried out by the SLPA owned Magam Ruhunupura Port Management Company Ltd through a broker under the Rajapaksa administration.

Purchasing bunkers have to be carried out from a supplier, however it is alleged that without a transparent process of calling for tenders the SLPA bought bunker fuel through a broker.

The tank farm at the Hambantota port was constructed under Phase I of the project, which cost a total of initially $360 million and later revised to $508 million for which the SLPA had obtained a loan from Exim Bank at a rate of 6.3 per cent.

Construction of the tank farm itself cost a total of $65 million obtained from Exim Bank at 6.3 per cent and a further loan of $20 million from the Bank of Ceylon (BOC) at LIBOR plus 7 per cent amounting to approximately 9 per cent.

The tank farm operation was carried out with another $30 million from a bank facility that was to be repaid monthly, Dr. Panagoda said.
He noted that however, under the current situation they have understood that even with the sale of the present stock of bunker fuel SLPA would incur a loss of $16 million.

Dr. Panagoda explained that the last purchase of fuel was made in December at a rate of $480 through a broker, despite the market value of the stock being $300 or less.

A further loan of $808 million was to be obtained for the second phase of the project. However the new administration has decided to stop this loan, Dr Panagoda said.

He explained that Phase II would be on hold since it involved acquiring further lands surrounding the port area at a cost of around Rs.1.2 billion as payment for compensation for the purchase of lands.

The new SLPA chief said that industries set to be established within and outside the port would be looked into by the Board of Investment (BOI) or the Industries Ministry. He noted that this was not a business for the SLPA to handle.

SLPA sources speaking with the Business Times said that the SLPA had taken on work that they were unable to handle as bunkering was a specialised sector that should have ideally been given to the private sector as in the Colombo port.

Sources also said that vessels purchasing bunker fuel at Hambantota were exempted from paying any port dues like navigational dues and wharf charges.

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