Udaya Gammanpila at a loss on the reason for CEYPETCO losses

In his statement, Minister of Energy Udaya Gammanpila claims that the accumulated losses of the Ceylon Petroleum Corporation (CPC) are due to the high purchase price of oil relative to its selling price.

The calculations from data in the annual reports of the CPC and the Ministry of Finance (MoF) indicate that the accumulated losses of CPC were LKR 335 billion as of 2020. They also provide the accounting information to identify the source of these losses.

The MoF figures show that CPC made gross profits in every year since 2013, where the revenue exceeded the cost of sales, including taxes (see Exhibit 1). Therefore, the minister’s claim that the CPC is buying at high prices and selling at low prices is contrary to the published accounts. Even if all other costs of distribution, administration and depreciation are added, the CPC still makes a profit of LKR 29 billion over the last 10 years.

The main source of CPC’s accumulated losses in the period are due to the finance costs and exchange losses due to unrecovered dues, outstanding debt, and currency mismatches in its balance sheet. From 2011 to 2020, the total finance cost and exchange losses amounted to LKR 335 billion.

The analysis shows that the entire accumulated loss of LKR 335 billion is equal to the losses related to poor treasury management in the last 10 years, and that the CPC accumulated a profit of LKR 29 billion through sales revenue in that period after accounting for all other costs. This finding contradicts the minister’s claim. 
Therefore, we classify his statement as FALSE.

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