Power and Energy Ministry to set up independent energy regulator as new players strain resources

The Power and Energy Ministry has initiated moves to establish an independent regulatory authority for the petroleum sector, admitting that it currently lacks the resources and manpower to effectively regulate the expanded market, following the entry of global giants Sinopec and R.M. Parks.

According to a progress report filed by the ministry, the government is currently responsible for the national-level regulatory activities for all major entities, including Ceylon Petroleum Corporation, Ceylon Petroleum Storage Terminals Ltd, Lanka IOC and the Petroleum Development Authority. 

However, with the issuance of new licences to Sinopec Energy Lanka and R.M. Parks for fuel import and distribution, the ministry stated that it is “facing issues with lack of sufficient officers and resources”, which is affecting the systematic execution of these regulatory duties.

To address this gap, the ministry has identified the requirement for an independent regulatory entity to successfully carry out these activities and is currently in the process of making the relevant national-level decisions to establish such a body. This move aims to ensure a level playing field and proper oversight as the country’s energy market becomes increasingly liberalised.

On the fiscal front, the liberalisation drive has generated significant non-tax revenue for the state. The report reveals that an annual licence fee of US $ 2 million is now being charged from four key institutions operating in the import, distribution and supply of petroleum products. This fee structure was implemented alongside a broader policy decision to increase all existing licence fees—including those for lubricants, tar and bunker fuel—by 20 percent, effective from January 1, 2023.

Furthermore, the ministry has opened up the aviation fuel market, issuing licences to two private companies to trade in the Jet A-1 fuel. Each of these institutions is charged an annual registration fee of US $ 10,000. In the lubricants sector, 10 licences were issued in the latter half of 2023, generating a semi-annual levy of Rs.21.36 million. 

The ministry noted that it is currently arranging to formulate a comprehensive policy framework for these products to further streamline the activities and increase revenue in the future. (NF)