Two amendments have been made to the agreements signed between Sri Lanka and its new fuel suppliers.

Accordingly, it has been decided that the conversion of Sri Lankan Rupees (LKR) to US Dollars (USD) must take place immediately with regard to money earned from fuel sales, while the recent tax of Rs. 50 imposed per litre of fuel will replace the 1% royalty fee imposed on suppliers, Minister of Power and Energy Kanchana Wijesekera said in Parliament.

Speaking with regards to the first amendment, the Minister explained that albeit the initial condition mandating that funds being brought into Sri Lanka be maintained as LKR in an account for a period of nine months, after which it may be converted to USD, the Central Bank of Sri Lanka (CBSL) recently suggested that the money being recovered from fuel sales, in LKR, be immediately converted to USD and be kept in an account for a period of one year.

It is only the conversion of Rupees into Dollars that will be allowed immediately, but the repatriation of funds will still remain for 12 months. So, the repatriation of profits are allowed, repatriation of funds will remain in Sri Lanka, as per the original condition, for 12 months. Because there will be significant amount of pressure on the foreign reserves if we try to convert bulk amounts after a nine-month period, and that might lead into variations in the exchange right”, Wijesekera explained.

Meanwhile, explaining the second amendment made to the agreements, the Minister stated that while it was initially suggested to impose a royalty of 1% on the three existing fuel suppliers and other future suppliers, this was later withdrawn following the imposition of a Rs. 50 tax by the Ministry of Finance, prior to the implementation of the former.

Explaining the matter further, Wijesekera stated that the decision to remove the royalty fee was taken in a bid to prevent double-taxing the consumers.

“Since a Rs. 50 tax has already been introduced after this scheme had come into play, that’ll be a double tax on the suppliers, and that will be passed on to the consumer again. So, since an already implemented tax is in place, the 1% royalty has been taken out”, he said in this regard.

The Minister assured, however, that the Rs. 50 collected from suppliers will be used to recover the payments made for the Indian Line of Credit (LoC), and the funds obtained from Iran in 2000.