Chevron Lubricants Lanka chief Kishu Gomes told a forum organized by the Public Utilities Commission of Sri Lanka (PUCSL), that while there only 13 licensed distributors including, 17 operators were importing producing or selling lubricants.
The PUCSL is Sri Lanka's multi-sector utilities regulator which is expected to regulate the petroleum sector from next year.
Gomes said some players were adulterating products with cheap base oil and counterfeiting established brands, some were selling them bulk in barrels, while were importing and selling in unbranded packaging.
At least one operator was importing lubricants and retail packaging in Sri Lanka without a license and distributing them, he said.
Another group were filtering used engine oil taken from service stations and re-selling after mixing with solvents, Gomes said.Such products used by unwary consumers could damage vehicle engines, he warned.
Sri Lanka's lubricant market was estimated at 60 million litres a year of which more than three million litres could be grey market or fake.
Gamini Amarasekera, an industry expert said a lubricant typically had a series of chemicals to disperse and keep in suspension dirt and particles, prevent particles from coagulating and other additives to reduce friction and fuel efficiency.
There were anti-oxidants to increase the life of the engine.
Over the last several decades technology behind lubricants had become more complex, and periodically new, more advanced industry standards were being set.
A vehicle could use a later standard oil, but the use of an older standard lubricant could damage the engine and reduce its lifetime, he said.
Sri Lanka's petroleum industry became a state monopoly in the1960 as property rights were violated by the state and existing petroleum firms were expropriated.
Lubricants became a private monopoly in the mid 1990s after Ceylon Petroleum Corporation privatized its Lubricants to Caltex, which is now part of the Chevron Petroleum Group.
In the next decade further freedoms were given to citizens of Sri Lanka to import and use other brands, licensing a dozen other operators in the next decade.
The petroleum ministry was also allowing some firms to directly import specialized lubricants.
Some vehicles came with manufacturer's recommendations on specialized oils that were being allowed to be imported directly by the ministry of petroleum, in a further improvement of the freedom enjoyed by Sri Lankan citizens.
Sri Lanka has made lubricants a licensed industry by using clauses in the Ceylon Petroleum Corporation law, which despite being a market player itself, has been given a regulatory role by the state over the industry, creating a clear conflict of interest.
Setting up an independent regulator will end the problem.
In 2004 imports were liberalized through the enactments of a petroleum products law and later a 'shadow regulator' role was given to the Public Utilities Commission, pending the enactment of legislation to give full legal authority.
Gomes said his firm had taken several unlicensed lubricant distributors to court but there was no mechanism to prosecute license violators at the moment. But counterfeit producers could be taken to court under Sri Lanka's intellectual property law.
Damitha Kumarasinghe, director general of the PUCSL said once his agency got the legal power to issue licenses, unlicensed operators would be prosecuted.
A testing lab would also be established, perhaps in partnership with Sri Lanka Standards Institution to check the quality of lubricants, after standards were set in line with international best practices, he said.
PUCSL said its policy was to tightly regulate areas, where there was less competition looking into costs and pricing and lightly regulate sectors where competition with a large number of players had been established.
Top players in the industry also made call to restrict full freedoms enjoyed by citizens on some automotive products, based on the standard arguments employed to restrict free trade and consumer choice around the world.
Gomes said transmission oil was now being freely imported by people and it should be included among the regulated items 'to protect' consumers who could damage their cars by using sub standard products.
A representative of Lanka IOC said brake oil was being freely imported and it should be included among licensed products to improve 'safety'.