New Delhi: Fuel stations across Sri Lanka are receiving less diesel than they order, and the distributors who run them have taken the problem to the country's President. The Fuel Distributors' Association said on Monday that three private suppliers — Indian Oil Corporation's local subsidiary Lanka IOC (LIOC), China's Sinopec and the US-based RM Parks — are filling orders only in part, and asked the government to step in before the shortfall spreads further through the network.
Follow The PSUWatch Channel on WhatsApp
"We seek the intervention of President Anura Kumara Dissanayake to settle this problem," association representative Kumar Rajapaksa told reporters. He put the effect on his members plainly. "They only supply reduced quantities for orders. This has badly affected our capacity to run fuel distribution outlets," he said.
Diesel carries more of Sri Lanka's economy than any other fuel. It moves public transport, runs farm and construction machinery and drives industrial equipment, and it fills private vehicles and the backup generators that businesses depend on.
The three companies say they are selling diesel below cost. Each litre is losing them around LKR 170, by their account, as international product and shipping rates climb and insurance and security costs rise with them. Behind that is the uncertainty around the Strait of Hormuz and the risk now attached to moving oil tankers through the region. What the operators want in return is a pricing formula that tracks their landed cost rather than a fixed retail price.
LIOC accounts for around 20 percent of the retail market, with Sinopec at about 10 percent and RM Parks at roughly 5 percent. Between them that is a little over a third of the country's fuel distribution, and none of the three is a recent arrival by accident.
LIOC has been in the market since the 2002 liberalisation, when Indian Oil bought 100 stations from the state oil company. Sinopec and RM Parks came in much later, under 20-year licences granted in 2023, each handed 150 Ceylon Petroleum Corporation (CPC) stations along with approval to build 50 more. RM Parks retails under the Shell brand through a licence agreement with Shell Brands International.
Follow PSU Watch on LinkedIN
Energy Minister Anura Karunathilaka said the government may have to choose between subsidising the cost or raising the pump price of diesel. Neither option is new ground. A three-month subsidy worth LKR 57 billion, paying LKR 100 a litre on diesel and LKR 20 on petrol, ran until it expired in June.
The state oil company has taken a different line. CPC chairman DJ Rajakaruna said it was continuing to absorb losses on fuel sales as part of its "national duty," and has disputed that the country is short of the fuel at all. "Diesel is available in the country. The issue is that they are not supplying it to the sheds," he said.
Energy ministry secretary Russell Aponsu has said the private companies are contractually barred from restricting distribution, and that the ministry would remind them of the minimum stock levels they are required to hold.
The cost pressure the three operators describe traces back to the Strait of Hormuz, which in peacetime carries roughly one-fifth of global petroleum trade. The channel has stayed largely blocked through the US-Iran conflict, closing off a principal route for the world's oil and pushing up the freight, insurance and security charges that landed cargoes now carry.
(PSU Watch is India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy. 👉 Click to join our channel now: PSUWatch WhatsApp Channel. Prefer LinkedIn? Follow PSU Watch on LinkedIN. Click to stay connected on Twitter here and stay updated)