Charges for letters of credit (L/Cs) are aggravating the already dire cash position of Sri Lanka's state-owned oil and gas company.

Ceylon Petroleum Corporation (CPC) is struggling to meet its obligations, largely because other state-owned entities have not paid their bills.

State debtors

Ceylon Electricity is thought to owe CPC a total of 28.3 billion Sri Lankan Rupees (LKR28.3 billion - US$222 million) while Sri Lankan Airlines owes the state-owned utility LKR27.4 billion.

Other debtors include the country's navy, railways, army and air force, which owe CPC sums of LKR6.7 billion, LKR5.3 billion, LKR4.1 billion and LKR1.8 billion respectively.

L/C interest

Adding to CPC's difficulties, it faces an LKR18 billion bill for interest charged on L/Cs it has opened to buy fuel.

Both CEB and Sri Lankan Airlines have criticised CPC in the past for not extending sufficiently generous credit terms.

Government ministers however, including petroleum industries minister, Anura Priyadarshana Yapa, are calling for the state-owned entities that purchase from CPC to arrange their own L/Cs with which to buy fuel.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.