30th December 2001

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An attendant at a Colombo fuel station pumps diesel. The government is planning to invite the private sector to import and sell fuel. Pic. by M.A. Pushpakumara.
Fuel imports to be liberalised

Mind your Business 

Cool corporate captains
Part of the solution to the economic stagnation is to put loss-ridden state institutions in the hands of captains of industry with a proven track record, the green leadership seems to believe.

For starters one such man has been asked to oversee the powerful Board that is supposed to scatter light but is now plunging the country into darkness.

More such appointments are on the cards and feelers have been sent to many corporate big wigs with invitations to join the ship of state enterprise.

Solar for solace
And still on the subject of power, those who matter have concluded that thermal and hydropower will never suffice to meet the country's energy needs in the near future.

So, a decision has been taken to tap a cheaper source - solar power, especially to cater to far-flung remote regions.

And this venture, we hear, will be entrusted to the private sector with the state doing its bit by offering generous tax concessions to investors willing to take the gamble.

Year of the Bull
The Bull did begin to run after the green win but then stopped dead in its tracks at the Colombo bourse.

But come the New Year and brokers expect the market to take off. There is general optimism and satisfaction about the way the greens have performed so far and the ceasefire has nudged overseas players, they say.

But most importantly, key institutional players are poised to make big buys, driving the market upwards, we hear.

Fuel imports to be liberalised

The United National Front (UNF) government, in a bold move, is planning to open the entire distribution and marketing of fuel, including diesel and petrol, to the private sector.

"We are freeing this segment from government monopoly and will make a formal announcement soon," an authoritative government source told The Sunday Times Business. The state-run Ceylon Petroleum Corporation (CPC) is the sole importer of diesel, petrol, marine bunker fuel and aviation fuel.

The source, who declined to be identified, said under the planned reforms, the CPC would act as a stabilising factor in the market instead of a monopoly. "Anyone can import, sell and have their own filling stations creating competitive pricing and helping the consumer," he said, recreating an era in the 1960s/early 1970s when multinationals like Shell and Caltex ran fuel stations.

He said the private sector involvement in fuel imports and distribution might not be immediate as necessary infrastructure like storage facilities and separate pipelines from the port is required for this purpose.

"We could, however, use the disused Trincomalee tank farm if we can put it into shape quickly in three to six months. That would also create jobs in that region," he said.

In a bid to cushion the rising cost of living, the CPC on Friday was scheduled to announce price cuts in diesel and petrol as world market prices are falling. Government officials said the CPC would henceforth pass the benefit of low world market prices to the consumer in addition to keeping a margin for debt servicing. "It's a good time to invite the private sector with world prices falling," an official said.

Finance Minister K.N. Choksy said last week that losses incurred by the CPC, Ceylon Electricity Board and CWE (Co-operative Wholesale Establishment) exceed Rs. 50 billion.

The move to free fuel from state control is in line with IMF reforms and may help the government in negotiating a fresh deal with the IMF, economists noted.

The government source said an IMF mission is expected next month to discuss the reforms process. "The negotiations are going to be tough," he said, adding that the IMF had sent a strong signal to the government that it doesn't want empty promises like in the past but would like to see action and reforms in place.

"There are positive signs from the government but we have seen announcements like this in the past and little action. We would like to see some action," observed Dr. Nadeem Ul Haq, IMF representative in Sri Lanka, when asked for his comments on the reforms process.

The IMF's standby facility has been on hold since September due to the government breaching several targets set by the original stand-by loan agreement. Choksy has said the government would re-negotiate the agreement.

The source said that wheat prices went up by Rs. 3 per kg on Thursday as a state subsidy to Prima Ltd had to be abandoned. This hike would raise prices of bread and other wheat-related products.

"Prima asked the government permission to increase prices about two weeks before the polls. That was turned down and instead a costly subsidy of close to Rs. 300 million was given to Prima which we can't afford," the source said.

He said the first shipment of Indian wheat, negotiated during a visit to India by Prime Minister Ranil Wickremesinghe, was expected around mid-January in the form of flour, not grain.

"Prima has informed the government that it is unable to mill the grain immediately. Import of flour can be sent to the market directly," he said, adding that there could be a price reduction in the next few months. India has offered to supply 300,000 tonnes next year on easy payment terms.

RRI chief urges caution on oil palm

Replacing rubber plantations with oil palm without serious scientific study could damage Sri Lanka's environment and economy, Dr. L.M.K. Tillekeratne, director of the Rubber Research Institute (RRI) said.

Rubber is more versatile and has greater potential for value addition than oil palm, he said in a paper on oil palm as an alternative crop for rubber.

Attacks in October on oil palm plantations in the southern region by politically-motivated interests brought into sharp focus the benefits of such a crop for Sri Lanka.

Trial plantations of 3,000 acres of oil palm set up in rubber growing areas should not be extended without carefully considering all the effects of such a move, and without consulting the RRI, he said.

Dr. Tillekeratne said that although the rubber industry had suffered in the last two years because of lower demand for tyres in Western markets, it had a "bright" future. The price of palm oil, he added, has been falling faster than that of rubber during the last couple of years.

Planting of rubber in hilly areas had minimised soil erosion and the crop also helped protect the environment by providing forest cover, he said.

Rubber helps protect the remaining forest reserves by catering to the firewood requirements for domestic cooking and industry as well as providing timber for use in the furniture and construction industries, he said.

"But from the trunk and branches of oil palm no other uses have been reported," Dr. Tillekeratne said adding that the only value addition possible in the palm oil industry was to convert the oil into margarine and soap.

He referred to a "scientific organisation" that has given a report on replacing rubber with oil palm, saying that even this report has recommended restricting oil palm to an area just enough to meet the local palm oil needs which are imported from Malaysia. Uprooting 5-6 year old rubber trees, even before marking the trees, to replace them with oil palm is a "national crime," he said.

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