Sri Lanka Accused of Lax Regulation

The chief executive of Sri Lankas largest lubricant supplier complained recently that the island country does too little to ensure fair play in the lubes market. He and other suppliers called for closer regulation to safeguard consumers and prevent losses to the nations exchequer.

Chevron Lubricants Lanka CEO and Managing Director Kishu Gomes, in the companys year-end report, called counterfeiting a major threat for lubricant marketers of Sri Lanka. Gomes claimed that the market contains a significant volume of products that are in some way fraudulent or illegal - from unauthorized sales by unlicensed suppliers to counterfeit sales of products resembling popular brands. All of these practices pose potential risks for consumers and represent a loss of tax revenue for the government, Gomes said.

The lubricants industry does not have its own regulator, Gomes noted, and therefore responsibility falls to Sri Lankas Public Utilities Commission, which describes itself as a shadow regulator. The PUCSL serves as an advisor to government ministries, but does not have specific authority to enforce laws.

[I]t becomes imperative to bring about the right regulations and put in place a legal framework to ensure sanity in the market for fair play and to safeguard the consumers, Gomes said.

According to Raja Amaratunga, a petroleum and energy sector expert with the commission, the government is considering legislation that would enact regulations specific to the lubricants industry. As the related legislation is not yet enacted, PUCSL does not have authority to regulate the sector,Amaratunga told Lube Report Asia. Until such regulation is adopted, he added, the Ministry of Petroleum Industries could take action using the powers granted under the Ceylon Petroleum Corporation Act No. 28 of 1961.

Amaratunga said the government has not studied the extent of lubricant adulteration and counterfeiting, but industry sources claim the practices are common. Lanka IOCs senior vice president for marketing and production of lubes, S. Ganguly, estimated that counterfeiting constitutes 5 percent of the countrys 55 million liters of annual lubricant sales. The PUCSL lacks policing powers, he said. It has no authority to cancel licenses or confiscate goods. It just acts as intermediary and can only recommend action to the Ministry of Petroleum.

Industry sources said counterfeiting is more prevalent in industrial cities of Western Province, such as Colombo and Gampaha. They said some lubricants are smuggled into the country declared as other types of goods so that they are subject to lower import duties.