The Sri Lankan government invited lubricant suppliers this month to apply for the new permits that it plans to issue for producing and selling products on the island nation.
Existing players, continued to oppose the plan, complaining that the market is not large enough to support any new competition.
Thirteen companies are currently authorized to sell finished lubes in Sri Lanka. In 2017, the country consumed 58,000 metric tons of finished lubes valued at Rs 26.5 Billion (U.S. $16 million).
The Petroleum Ministrys request for qualifications is part of a plan to create healthy competition for supply of quality lubricants. The government requires companies that blend or sell lubricants within the country to have a license.
The government has not stated the number of new licenses that will be granted. Companies applying for them must have at least five years of experience in the lubricant business. A minimum investment of $5 million is required of those granted licenses to produce, and plants must have capacity to make at least 7,500 tons of lubricants per year or 1,000 t/y of greases.
Those obtaining licenses to trade, distribute or sell lubricants must own their own brand or be agents for a brand name, and they must prove the ability to invest 1 million dollars, the ministry said.
Current license holders have expressed opposition to the granting of new ones since the idea was first proposed a few years ago.
[The] opening of the market for new players seems illogical to us, Niroshan J. Pieries, CEO of Laugfs Lubricants, told Lube Report.
Existing license holders are more than enough to cater to the needs of the market. The market is not growing. New players might find it difficult to survive as the existing players will come up with innovative schemes to protect their market share. The existing players are already suffering; the industry might further suffer as competition will get intense, he added.
These sentiments were echoed by Karun Krishnan of Bharat Petroleum Corporation Ltd., who claimed that the market actually shrank during the first quarter of 2018. The vehicle imports scenario is subdued, and the future growth of the market is expected to be 2 percent. The opening of the market is a challenge for existing as well as new players.
All the prominent players are in a tight spot, said an industry leader who asked to remain anonymous. If the Sri Lankan market could match the growth of Indias market, the industry insider explained, additional licenses would make sense. Imports have become costly as Sri Lankan rupees have devalued against dollars, the source added.
Another source speculated that the governments main motivation is to gather more revenue from license fees.