Cash-starved Sri Lanka to end fuel duopoly to ease fuel shortages

Sri Lanka is suffering its worst economic crisis since its independence, with foreign exchange reserves at a record low of $1.92 billion, according to the Central Bank, though analysts estimate a lower level of usable funds.

The island of around 22 million people is struggling to pay for essential imports of food, medicine and, most critically, fuel. The government closed urban schools for about two weeks from Tuesday and allowed fuel supplies only to services deemed essential like health, trains and buses as fuel stocks would last only a week or so,  based on regular demand.

The state-run Ceylon Petroleum Corporation (CPC) controls about 80% of the fuel market and Lanka IOC, a unit of Indian Oil Corporation, the rest. The Cabinet also allowed bunkering companies, already registered with the government, to import jet fuel.

Sri Lanka needs about 1.2 million litres of so-called A1 jet fuel a day to supply airlines but the CPC has been unable to meet the requirement. In a statement, the government said, “The Cabinet made this decision to ensure that flights are not disrupted due to the fuel shortage.”

Wijesekera flew to Qatar late on Monday night while Education Minister Susil Premajayanth is due to arrive in Russia on July 3. Wijesekera hopes to find a long-term fuel supplier in Qatar who is “willing to work with Sri Lanka’s foreign exchange and other challenges”, said a ministry official, who declined to be identified as he is not authorised to speak to the media.

Wijesekera told reporters on Sunday that Sri Lanka had been in talks with various countries, including Russia, for weeks on buying fuel. Traffic was light on Tuesday on the streets of the main city of Colombo, with city schools shut and most public and private sector employees working from home. But buses and trains were running and shops were open for groceries and other essentials.