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CPC says can’t cut jet fuel prices to levels at Chennai airport

29 August 2019 09:54 am - 0     - {{hitsCtrl.values.hits}}

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By Nishel Fernando 
Ceylon Petroleum Corporation (CPC) is opposing the Cabinet decision to sell aviation fuel at prices equal to the Chennai airport—a measure taken to help the tourism industry recovery after the April 21 Easter bombings— citing financial non-viability. 


“We can’t match the fuel price at the Chennai airport because our cost is more than that. The board of directors of CPC has taken a decision on this and it will be informed to the Cabinet of Ministers shortly. We have explained this to the political authorities as well,” CPC Chairman Sena Withanage told Mirror Business. 


The Cabinet of Ministers in July decided to grant several concessions to the travel industry, including a reduction in aviation fuel prices to the levels at India’s Chennai airport, to support the recovery of Sri Lanka’s tourism sector in the aftermath of the Easter 
Sunday attacks.


However, Withanage noted that CPC would lose US $ 25 million per annum if the proposed concessions are to be granted. 


Meanwhile, addressing a press conference in Colombo, yesterday, Sri Lanka Tourism Development Authority (SLTDA) Chairman Johanne Jayaratne said that the impact on CPC’s bottom line has been considered before the Cabinet approved the proposal. 


“The impact was considered but there’s a little bit of delay on granting this concession. I don’t know what is happening internally at CPC. 


Apart from the fact that we are having a crisis that we are recovering from, Sri Lanka has one of the highest jet fuel prices in the region. In order to develop tourism in Sri Lanka, these factors have to be taken into consideration very seriously,” he said.


He noted that the SLTDA is holding weekly meetings with the CPC officials to implement the Cabinet proposal.

He also revealed that Tourism Development, Wildlife and Christian Religious Affairs Minister John Amaratunga plans to hold ministerial-level talks with Highways and Road Development and Petroleum Resources Development Minister Kabir Hashim to resolve the issue. 


However, Withanage pointed out that the Chennai airport sources more locally-refined oil and the suppliers have a lower operational cost compared to CPC. Therefore, he stressed that it’s not justifiable to ask CPC to bring down the aviation fuel prices to the levels at the Chennai airport. 


“We will try to give the best price above the cost of production. It will be little bit less than the current prices,” he said. 


CPC plans to sell 0.64 million MT of jet fuel this year, of which only estimated 0.25 million MT will be refined in Sri Lanka based on this year’s estimated market demand. 
Withanage said that CPC reduced the jet fuel prices by the 16-26 percent range for all airlines, prior to the Cabinet proposal.  


“With this price reduction, we have brought the jet fuel prices equivalent to other airports in the region. Our jet fuel prices are cheaper than the regional airports in Bangladesh, Pakistan and the Maldives. However, we can’t match the jet fuel prices of Singapore,” he said. 


In 2018, CPC lost Rs.103 billion amid a thumping foreign exchange loss of Rs.82 billion. The aviation fuel business remains one of the few profitable operations for CPC, which contributed Rs.64 billion in revenue to in 2018. 

 

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