RESPONSE ENTITLEMENT

PALMS OILED FOR LUBRICANTS
This has reference to your article of 3rd January 2010. We have gone through your article very carefully and found it to be erroneous.
Ceylon Petroleum Corporation has initiated many projects with the approval of the Cabinet of Ministers for the benefit of the nation. Some of the projects are yet to be implemented but the lubricant business has been implemented successfully.
About 3 decades before, the lubricant business was handled by many multinational companies, but with the nationalization of the oil industry, the entire lubricant business was under Ceylon Petroleum Corporation until it was sold to the Dubai based Caltex Ltd. With the liberalization of the lube oil market, Ceylon Petroleum Corporation also re-entered, in order to provide the right product for the right application.
Ceylon Petroleum Corporation sells the full spectrum of lubricants inclusive of automobile, marine, industrial and specialty lubricants and greases, transformer oil, transmission oils etc. There are more than 100 different items in different packs for the convenience of end users.
Whether these products are slow moving or fast moving, it is essential to hold sufficient stocks at least for a period of 03 months. Ceylon Petroleum Corporations’ re-entering into the lubricant market has created the following financial and socio-economic advantages to the country.
a. Very good corporate image due to excellent quality of the lubricant products and significant profit for the organization.
b. Ceypetco managed to introduce excellent 2T oil without any kerosene in it. This has prevented sales of subsidized kerosene to lubricant blenders. Due to new Ceypetco 2T oil, it can be seen that most three wheelers operate without harmful/toxic smoke.
c. In addition to this profit and kerosene subsidy saving, CPC has paid approximately Rs. 400 million as government taxes to the Treasury.
d. Re-employed excess/redundant CPC employees in a productive manner in this business.
According to your news article, the same resource has given you totally incorrect information in respect of R 87 Petrol. The proposal was only a trial run and the distribution of 25 cans of blended fuel to three wheelers was only a part of the feasibility study. It was revealed that the capital expenditure requirement for this proposal will be so big hence, the proposal was not feasible at that time.
On that basis the introduction of R 87 fuel has not been implemented. It is totally incorrect to say that Rs. 2.5 million has been spent on launching. No launching campaign was held and not a single cent has been spent on launching, as the product was not even blended on commercial basis. The 25 samples were blended in the refinery laboratory for an experimental trial run, which is a routine R & D activity in the CPC.
With regard to the LPG business, the intention of CPC was to provide low price domestic LPG to consumers. The CPC intention was to use its available under-utilized infrastructure and its excess staff (to this end.). The filling plant was imported and arrangements were made to import required cylinders. However, Laugfs Gas Ltd. who purchased total refinery production of LPG obtained a Supreme Court order for the exclusive purchase of refinery produced LPG. On this Supreme Court ruling CPC differed implementation of this project and at the moment is awaiting re-consideration of the decision.
The fact is that the LPG retail business is “on hold” due to the Supreme Court decision but not due to lack of cylinders.
With regard to the lubricant profit, the 8.3 million declared profit is for the first 03 months and not for 06 months. The same is “net profit” after deducting all expenses and taxes and absorbing salaries of excess employees of the CPC and absorbing many utility bills like telephone, water and electricity. The annual gross profit for the first 04 months is more than 33 million and expected gross profit for the 06 months will be more than the double.
MAJ. GEN. (RTD.) A. THORADENIYA USP CHAIRMAN & MANAGING DIRECTOR CEYLON PETROLEUM CO PORATION

Reporter’s note: We stand by our story and reject Mr Thoradeniya’s attempt to excuse and conceal waste, corruption and weak management. We contacted him but he disconnected the phone line last week saying he was busy. We were unable to get through to him when this paper went to press, midnight Saturday (3). Due to space constraints we refrain replying to all aspects of his letter. However, we say that recently launched projects - eg: R 87, LPG, Bunkering have totally failed as there was no proper market study prior to start-up and millions of rupees went waste. There is no proper marketing machinery for the lubricant oil business as well, though it does make some profit.The main reason why CPC cannot capture the lubricant market is the paltry commission it gives to shed owners and distributors. Shed owners and distributors promote lubricant oil of other companies due to high commissions given. Mr.Thoradeniya had admitted at a meeting recently that lubricant oil prices should be reduced as they were higher than the prices of competitors. It is a falsehood to say that CPC maintains three months stocks because some of the oil PRODUCTS imported such as GL4SAE 90, GL 4SAE 140 and Flushing oil 200 litre drums are not in demand in Sri Lanka. Loads of such drums lie in CPC go-downs for many months.