Sri Lanka Liberalizes Lube Industry


Sri Lanka is taking steps to liberalize the countrys lubricant industry, and that bodes increased competition for market leader Caltex Lanka Ltd.

The Public Enterprise Reform Commission in July invited bids for new licenses to sell lubricants within the South Asia nation. In addition, the governments Petroleum Ministry is developing a proposal to amend the tariff structure so that imported products have less of a disadvantage to lubes blended domestically.

Caltex Lanka, in which Chevron owns a 64-percent stake, operates the only existing blending plant in Sri Lanka. The company also holds more than 70 percent of the nations lubricant market, which is estimated at 45,000 kiloliters (11.7 million gallons), according to Lanka Business Online.

The Petroleum Ministry is working with a committee that may recommend increasing the tariff on base oil imports, reducing the tariff on finished lubricant imports or a combination of the two. The import tariff on lubricants is currently 28 percent, while base oils face a tariff of 15 percent.

Our intention is to narrow the gap between the tariff costs for [lubricant] imports and lubricants that are produced locally, the Petroleum Ministrys Kanthi Wijetungatold Lube Report yesterday. That would put imports at less of a disadvantage. Wijetunga said the government is expected to choose a course of action in coming weeks.

Five other companies already have licenses to import lubricants: Indian Oil Corp., ExxonMobil, Valvoline, BP and Shell. Lanka Business Online reported last week that the Public Enterprise Reform Commission has received bids from more than 10 other companies wishing to enter the market. The report said the commission plans to award new licenses on a revolving basis, calling for new applications every four months.

The level of interest should come as little surprise; volume demand for lubricants in Sri Lanka is growing at a healthy annual clip of almost 10 percent, LBO said.

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