COLOMBO – Sri Lanka’s Parliament on Tuesday (18) approved legislation allowing foreign competition in the local fuel market, ending a 19-year duopoly as the bankrupt island struggles to import oil.

The move cleared the way for international oil firms to re-enter Sri Lanka for the first time since the nationalization of oil companies in the early 1960s, with the exception of the Indian Oil Corporation, which has operated there since 2003.

“This will allow global suppliers to enter as retail operators,” energy minister Kanchana Wijesekera said. “This will liberalize the energy sector.”

Officials said private companies will have to finance the import of oil from their own foreign exchange reserves and agree to retain their profits in Sri Lanka for at least a year.

The new law was rushed through as the government is out of foreign exchange to import fuel, a predicament that has brought acute shortages and strict rationing.

The shortages sparked widespread protests that toppled president Gotabaya Rajapaksa in July as Sri Lanka plunged into its worst economic crisis since independence from Britain in 1948.

Sri Lanka nationalized foreign oil firms in the early 1960s, handing a monopoly to the state-owned Ceylon Petroleum Corporation (CPC).

CPC’s monopoly ended in 2003 when Colombo introduced limited competition by allowing India’s state-owned Indian Oil Corporation to enter the local retail market.

The Indian company’s Sri Lankan arm now controls about a third of the domestic fuel market while the rest is held by CPC, which is seeing huge losses and is out of dollars to pay for new imports.

Meanwhile, hundreds of CPC employees were on sick leave protest on Tuesday as a protest against the new amendment citing that the minister was trying to sell the state assets to foreign firms despite the CPC making profits in July and August.

Data showed the CPC’s losses have surpassed 600 billion rupees so far due to subsidies given in the past and over-dues from other state enterprises like Ceylon Electricity Board (CEB).

Minister Wijesekera, responding to the trade union action said petroleum services had been declared an essential services for the last 6 months.

“If any employee or trade union is found breaching the essential services regulations and disrupting services, immediate legal and disciplinary action will be taken against them.”

– AFP/EN