The Sri Lankan government has decided to increase the number of companies licensed to supply its 50 million metric ton lubricant market. Industry insiders predict it will lead to greater competition among marketers seeking to protect their share of the pie.
The government has gone for fresh licensing with the intention to bring in more competition and to offer better products and prices to customers, Soumen Ganguly, Lanka IOC senior vice president of lubricant marketing and production, told Lube Report Asia. A unit of Indian Oil Corp., Lanka IOC is one of the existing license holders that stands to face increased competition, but Ganguly said the governments move could help tamp down on sales in the so-called grey market, domain of cheap, sub-standard products. Sri Lanka’s Public Utilities Commission acts as the shadow regulator for lubricants, but Ganguly said it lacks the power to prosecute those that sell low quality oils.
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Sri Lanka at one time had a state monopoly in lubricant blending and selling. It became a private monopoly in the mid-1990s after Ceylon Petroleum Corp. sold the business to Caltex, which is now part of U.S.-based Chevron.
Currently there are 13 license holders in Sri Lanka: Chevron Lubricants Lanka PLC, Lanka IOC PLC, McLarens Lubricants Ltd., United Motors Lanka Ltd., N. M. Distributors Ltd., Associated Motorways Ltd., Laugfs Lubricants Ltd., TVS Lanka Ltd., Dynamic Motors Ltd., Interocean Lubricants Ltd., Toyota Lanka Ltd., Navaloka ABC Lubricants Ltd., and Ceylon Petroleum Corp. Chevron and Lanka IOC have authority to blend in Sri Lanka while the others are only allowed to import, export, distribute, supply and sell.
According to industry insiders, the government move is intended to bring in more competition and offer better products and prices to the customers. It is also being viewed with the backdrop of rapid growth in the grey market for lubes, which is seen as impacting the countrys transport system and the economy.
Sandya Wijebandara, undersecretary of Sri Lanka’s petroleum ministry, told a business forum in Colombo, We are ready to license any number of players who meet the criteria. No new licenses have been granted yet, but highly placed sources in Sri Lanka’s Petroleum Ministry said the ministry has received 20 applications for dealerships.
Looking back at its history of state and private monopolies, it appears that the Sri Lankan government is determined to continue its shift from checks and control toward a more open market.