The government has decided to allow the three foreign companies entering the retail fuel market in Sri Lanka to sell fuel below the approved price of the Ceylon Petroleum Corporation (CPC).

A senior official of the Power and Energy Ministry said the contracts with the three companies will be signed by the end of this month and the companies will launch operations within a month after the contracts are signed.nAccordingly, China’s Sinopec, Australia’s United Petroleum and Shell Company together with RM Parks Inc of the US have been approved to enter the retail fuel market in Sri Lanka.

Once the three companies are allowed to sell fuel at less than the fixed price, the senior official said the demand for CPC fuel will decrease.At present, the government spends an average of US$ 450 million per month on fuel imports and the ministry hopes that each of the three companies will bring US$ 120 million worth of fuel to Sri Lanka per month, reducing the government’s expenditure on fuel.

The terms of the agreements with new companies include that they must refrain from using local banks to find US Dollars needed to import fuel and that the profits earned can only be taken out of the country after one year.The Power and Energy Ministry has estimated that the three companies will import US$ 2.2 billion worth of fuel per year.The agreement will be signed for 20 years and the companies must pay US$ 2 million annually as renewal fees.Even after 20 years, the companies can continue to operate based on the agreements made through negotiations.

Sources said the companies will pay an amount as storage fees and the government will receive a certain percentage from a liter as revenue. Under the agreements, the companies have also been given the opportunity to sell high-end products used in luxury vehicles.