Sri Lanka’s Lubes Competition Plans Draw Fire


Sri Lankas Public Utilities Commission of Sri Lanka hosted a public meeting April 24 to invite comments about prices and quality of lubricants available in the island nation. What it heard included complaints that the government plans to allow more competitors into the market but is doing too little to protect existing ones from unscrupulous business practices.

The meeting was held in the capital Colombo, and according to the PUCSL, was attended by more than 300 representatives of lube suppliers, government agencies and industrial businesses, along with members of the public. The commission provided Lube Report a meeting transcript, which served as the basis for this article.

The platform for public input was organized as part of run-up to a plan by the commission and the Petroleum Resources Development Ministry to increase the number of companies allowed to supply lubricants in the country. That plan was part of a budget proposal back in 2016, and the PUCSL, appointed regulator of the industry, is now working to finalize the regulatory and policy framework by 30 June. Lubricants may not be manufactured of sold in Sri Lanka without licenses to do so, and the number of licenses is capped.

The ministry, along with the PUCSL, has set up a project committee and chalked out a basic requirement list to implement the budget proposal made in 2016, Petroleum Resources Development Ministry Additional Secretary A.H.S. Wijesinghe told meeting attendees. He added that the ministry is considering issuing import licenses to local manufacturers that require small volumes of lubricants.

A committee with representatives from the ministry, the PUCSL and the Ceylon Petroleum Corp. would issue the licenses, he said. He added that the ministry may also consider recommendations of original equipment manufacturers as it considers this plan.

The CEO of Chevron Lubricants Lanka Plc, the countrys largest lubricant supplier, called for the government to improve its regulation of the market before liberalizing it.

The objective of a public consultation should be finding ways and means to safeguard the interest of those engaged and to benefit from the industry and come up with suggestions covering the entire spectrum, rather than just limiting things to price and quality measures for the development of the lubricant market in Sri Lanka, Kishu Gomes said.

He objected to the plan to allow new entrants, stating that Sri Lanka already has a competitive market and that consumers have access to a range of top quality, branded lubricants from the worlds leading manufacturers. Instead, he said, the government should empower the PUCSL to take legal action against those who violate regulations related to lubricants. The commission is charged with oversight of the industry, but only the Petroleum Resources Development Ministry has power to bring legal action. Gomes also contended that it creates a conflict of interest for CPC to have a say in licenses since it also supplies lubes.

There are 13 market players and 22 authorized lubricant brands in the country, Gomes said. These players sold 65 kiloliters of lubricant in 2017, which could grow up to about 85 kiloliters. He estimated that 20 percent of todays volume are adulterated products and that 10 percent are imported without smuggled into the country. He claimed to have reported many cases to the authorities, but said they did not intervene.

Lanka IOC, another leading supplier, abstained from sending anyone to the meeting. We have not participated in the consultation meeting as it is of no use, Senior Vice President B.B. Patra told Lube Report afterward. There are 13 players in a small Lankan market, and the government is collecting around Rs. 300 million (U.S. $1.9 million) in revenue from these 13 players annually as license fees. New licenses may increase the coffers of government, but some players might be compelled to quit the market due to shrinking margins and tough competition. Patra argued that the government should stabilize the market by halting adulteration and illegal imports instead of merely opening the market for new players.

Speaking on the occasion, Damitha Kumarasinghe, director general of the Public Utilities Commission of Sri Lanka, said PUCSL decided to hold a public consultation as the necessity of having an effective and independent mechanism for ensuring product quality, fair prices and protecting the interests of consumers and market players have arisen; therefore, PUCSL organized the public consultation to advise the government on remedial measures.

PUCSL officials made several proposals, one being that Sri Lanka Customs and the nations Import & Export Control Department both be enlisted to combat unauthorized lubricant imports. They also proposed guidelines for rerefining used lubricants; a system whereby cases of lubricant adulteration could be investigated and prosecuted; and revisions to the structure of lubricant duties that would address price differences between imports and locally produced lubes.

Kumarasing he said the PUCSL would consider all input to adjust its recommendations before forwarding them to the ministry by the end of June.

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