A high-ranking Sri Lanka official recently called for the country to do away with rules that make it more difficult to import lubricants.
Finance Minister Ravi Karunanayak proposed in his 2016 budget speech last week to do away with the practice of prohibiting users and distributors of lubricants and ceramics from importing them unless existing suppliers state that they do not carry such products.
Presently the lubricant market is managed only by a few companies, Karunanayak said. Hence I propose to liberalize the lubricant market, and I encourage companies to venture into more value-added products with high investment.
Existing rules require companies like Colombo Dockyard to go through a long administrative process to import specialty lubricant brands demanded by ship owners that bring vessels to Colombo for repair and servicing. Critics say such restrictions make it difficult for local companies to compete with counterparts in places such as Singapore, which is an open port.
Sri Lanka requires companies selling lubricants in the country to obtain a license. Currently, there are 13 license holders, three of which are authorized to operate blending plants: Ceylon Petroleum Corp., Chevron Lubricants Lanka and Lanka IOC.
The lubricants industry does not have its own regulator, and the government has appointed the Public Utilities Commission of Sri Lanka as the shadow regulator for the lubricants market. The PUCSL serves as an advisor to government ministries, but does not have specific authority to enforce laws.
According to industry insiders, the government move is intended to bring in more competition and offer better products and prices to the customers. It is also being viewed with the backdrop of rapid growth in the gray market for lubes sold outside the licensing program, which is seen as impacting the countrys transport system and the economy.
Lanka IOC Managing Director Subodh Dakwale told Lube Report Asia that Karunanayaks proposal is unlikely to have much of an effect on the local lubricant market.
In this age of liberalization, the government might be tempted to open the market, but the government move is unlikely to impact the existing number one and two players – Chevron Lubricants Lanka and Lanka IOC, he said. The new players will find it difficult to compete with existing players. Dakwale also said the government needs to keep an eye on the quality of imported products. Small players might import spurious products at low cost and spoil the market.