Credit Shuffle

Sept 15, 2008 (LBO) – Sri Lanka’s state-run petroleum utility Ceylon Petroleum Corporation (CPC) is covering overdue government accounts with an Iranian credit, but its finances are too fragile to cut prices, a top official said. Iran has given the CPC a rolling credit to cover four months of imports interest free and another three months with interest, which the utility started using from the first quarter of 2008.

CPC chairman Ashantha de Mel said his firm had used “about 500 million dollars” of the credit so far, but unpaid government accounts was eating up the credit.

De Mel has said earlier that he preferred to use only the four months of interest free credit. Sri Lanka imports crude from Iran.

De Mel said a large debtor was the state run Ceylon Electricity Board (CEB) to which diesel was sold at 85 rupees a litre (diesel is retailed to other customers at 110 rupees a litre) but the power utility does not pay on time.

The CPC has come under pressure to cut prices, especially in petrol, as global prices plummeted. Petrol is now retailed in Sri Lanka at more than double the Singapore price benchmark price, according to Central Bank data.

He says CPC has about 50 billion rupees (460 million US dollars