Conflicts simmering behind signs without fuel | Print edition

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  • Hangar owners are in crisis as CPC demands upfront cash payments

By Chrishanthi Christopher

The sudden appearance of no fuel signs from time to time in fuel sheds indicates that all is not well with the country’s fuel dispensing system despite the government’s claim that the QR code system is working properly.

Such signs also appeared this week, when some shed owners refused to fill their tanks in protest at the Ceylon Petroleum Corporation’s decision to levy a commission on the payment they made for fuel.

In an earlier decision to find funds to buy its monthly quota, the CPC introduced a 45% commission on its 225 distributors known as Corporate-owned Dealer Outlets (CODOs).

A CPC shed that was unable to replenish its inventory due to new CPC payment rules. Photo by Akila Jayawardana

The CPC had sent notices to CODO, saying it intended to charge an additional 35% on the given dealer margin on fuel. CPC says the commission was only charged to hangar owners who operated hangars on CPC land.

Restless CODO members presented their case to the Minister of Energy this week, leading the CPC to postpone implementation of the decision.

However, another dispute between the CPC and hangar owners continues to simmer. That’s on top of the CPC’s decision to require cash upfront payments from some 1,200 gas station operators. This caused an interruption in the fuel distribution chain last week, with sudden long queues at petrol stations.

Hangar owners said they were unable to comply with the CPC’s insistence on prepaying cash payments when placing orders.

In Puttalam, shed owner Fazal Abuthahir said the CPC’s requirement meant they had to be ready with cash for the next tank load as previous stocks had yet to be sold. .

He said orders needed to be placed early with the CPC to ensure the shipment was delivered in time to replenish the tanks. “The new requirement means that we have to invest double the amount on the ton charges. This has created a strain on our business,” he said.

He pointed out that due to the new requirement, several gas stations could not replenish their stocks and had to close their hangars at least two days a week.

The Fuel Distributors Association said the CPCs decision would see their business liquidated by a number of hangar owners.

A spokesperson for the association said that, in line with decades-long practice, the CPC would give hangar operators time to settle bills and accept payment by check. But with the new requirement, shed owners are forced to borrow money from lenders at high interest rates, he said.

Bank interest rates on loans have tripled in recent months to 34%, making it unprofitable to continue trading with such loans, he said.

“We will be forced to terminate our contracts with the CPC and join the proposed new companies which we hope will give us a better deal,” he said.

However, the CPC said the company was forced to adopt the practice because its suppliers insist on upfront payment when placing orders.

President Mohamed Uvais said the CPC had exceeded its borrowing limits from state banks and now had to find money for purchases from other sources.

“Global fuel prices are also high and we need to come up with around $600 million a month,” he said.

The president said regular CPC suppliers who previously provided one to two months of credit were now refusing to extend that facility. “The country’s credibility is low and our ratings have gone down,” he said.

He said hangar operators had benefited from the CPC credit facility for decades and now was the time for them to return the favor and cooperate with the CPC.

Responding to the hangar operators’ claim that they would go out of business and join new companies that would give them a better deal, the chairman said: ‘They are on a deal and need Council consent to move.’

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