ISSN: 1391 - 0531
Sunday, September 24, 2006
Vol. 41 - No 17
Financial Times

New fuel card system for Govt. employees

By Chaturi Dissanayake and Natasha Gunaratne

State banks, the Ceylon Petroleum Corporation (CPC) and state enterprises in a joint collaborative effort are launching a new fuel card system for government employees which will revolutionize fuel purchasing in this country, officials said.

This plan is designed to combat the heavy competition the CPC faces from Lanka Indian Oil Company (LIOC). The initiative for this is being taken by the 20 government institutions that fall under the Strategic Enterprise Management Agency (SEMA), which in conjunction with Bank of Ceylon (BOC) and People’s Bank (PB) is going to issue fuel cards to all their 146,000 employees who are entitled to a fuel allowance.

SEMA is considering extending this facility to the public in due course. The objective is to create a cashless transaction system with a totally automated electronic payment system in place instead of the current manual system in fuel stations.

The fuel card system is intended to consolidate CPC’s customer base because all refuelling requirements will be handled by CPC outlets. Currently, the CPC operates 152 filling stations, the Treasury owns 107 stations and there are 609 dealer owned stations, bringing the total to 868. A multi million rupee investment has been made by banks in the installation of point of sale terminals. The terminals will generate revenue for banks through its transaction fee. “The government spends approximately $1.7 billion dollars a year on fuel. This system can save billions of rupees in misdirected subsidies. The biggest foreign exchange consumer is the purchase of fuel. This is one strategy the government is adopting to mitigate fuel prices and requires automation of the system,” said the Chief Operating Officer of SEMA Chris Dharmakirti.

Several benefits arise out of the fuel card system. The CPC, for example, is able to secure a loyal customer base out of all SEMA institutions. Further the fuel card can be used as a marketing tool to hold onto the dealer networks since they can guarantee a loyal customer base through the fuel card system.

“This provides an overall advantage to all the stake holders involved, to CPC dealers government banks, government departments and for CPC itself. Besides the fact that the card generates a loyal customer base this is a good advertising arrangement and the brand image of CPC will improve,” Metsiri Wijeyagoonawardana, acting Chairman of CPC told The Sunday Times FT.

The banks get an opportunity to issue a debit card to SEMA institution employees and the institutions themselves are able to monitor fuel consumption and the purchasing patterns of their employees, leading to abuse prevention at the pump.

The fuel card, which will have a photo ID of the driver and other information of entitlement can track all fuel purchases, how much fuel was pumped and at which stations the card was used, providing a purchase history.

This is an essential aspect of the card since there is zero potential abuse. Use of this card also reduces the exposure of filling stations in terms of the amount of cash they carry. This has the potential of reducing robberies of filling stations, particularly in isolated areas of the country.

An essential feature of the introduction of the card is that it will result in better cash flow management for petrol stations. Currently, many government vehicles purchase fuel on credit. Debt collection becomes a huge problem for these stations and their receivables run into millions of rupees. If all government agencies can purchase fuel through a debit card, the problem of receivable collections will not arise.

Banks can further benefit from the fuel card plan by offering auto loans, marketing loan products. The card also enables the government to directly target the recipients of the fuel subsidy better through the card infrastructure where the subsidy payment would be made directly to individual bank accounts restricting any form of abuse of the subsidies made available to any party.

The card database will also be linked to paying institutions such as the Register of Motor Vehicles (RMV), the paying institutions, and the driving licence and national identity card of the driver. SEMA also wants to install vehicle tracking devices, particularly for the Ceylon Transport Board (CTB) vehicles and other selected government institutions. This is a costly process but is crucial in identifying abuse of the system.

A training programme for the stake holders involved in the new venture has already commenced along with a seminar and a launch meeting which was held on 1 September 2006. The fuel cards will be launched this month and the process is expected to be completed by the end of this year. The timeframe for total automation is estimated to be three years.

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Copyright 2006 Wijeya Newspapers Ltd.Colombo. Sri Lanka.