[TusharK]

Sri Lanka is facing a serious energy crisis as its state-owned petroleum company has run out of cash to buy oil.



According to Udaya Gammanpila, Minister of Energy, the state-run Ceylon Petroleum Corporation (CPC) which is already operating under huge losses can no longer afford to import oil from abroad. This has led to a massive shortage leading to long queues at fuel bunks.

The CPC suffered losses of up to 42% on the sale of diesel, amounting to US$ 415 million last year alone. It has also been reported that several thermal power stations in the island nation had to be shut down last week due to the severe fuel shortage.

The minister stated that earlier, the government was short of dollars to import oil and now it doesn't have the rupees to buy the dollars. The US$ 500 million credit line offered by the Indian government last month should provide temporary relief.

Source: Economic Times

Link to Team-BHP News

[iamahunter]

I understand the part of "help thy neighbors" but at what cost!?

Here in India we have been paying through the roof for that liter of petrol, major chunk which goes to the government as tax. Now that tax is apart from the tax that I've paid on my earnings!

This is tax payer's money which is being offered to the other country!

Why not pass this much subsidy to the people who have generated this money!

[libranof1987]

Sri Lanka is actually in pretty bad shape. Domestic politics, and hence international policies, along with Covid have pushed the country down a very dangerous path. Esp with no tourism for 18 months, more so if you count $$ tourism, have left SL with 0/negligible forex reserves. It's not just petrol but even cooking gas. Prices have doubled, and availability is scarce.

Here's a sorry sight from our trip in Nov last year: people queuing up to buy cooking gas.

[ninjatalli]

Sad to hear this - surprisingly we didn't face this during our trip back in December. We rode on our rented scooter(s) across multiple cities - Kandy, Ella, Galle and at all places, the petrol availability was normal - never saw lines or unavailability at any of the pumps we went to.

Instead it was the vegetables which we heard (and observed) had a lot of scarcity. Most homestay/restaurant owners were lamenting about the scarcity and higher costs associated with something basic as vegetables and pulses.

[srini1785]

Simple math:

Tax revenue : 7.3B$
External Debt : 35B $ ( Total Debt 2021)
GDP : 80B $ (GSD figures 2021).

Debt to GDP ratio : 101.

It does not take an economic genius to recognize the problem. Slowly the country would need to surrender its sovereignty to You-know-who (They are watching this too).

Then again, we were also in a similar state somewhere in the 80s. So they would recover.

[SnS_12]

Originally Posted by iamahunter

I understand the part of "help thy neighbors" but at what cost!?

Here in India we have been paying through the roof for that liter of petrol, major chunk which goes to the government as tax. Now that tax is apart from the tax that I've paid on my earnings!

This is tax payer's money which is being offered to the other country!

All these tax payers money is currently been used by many countries to convert private debt to sovereign debt.. For eg look at China and the infamous Evergrande group, wherein the government is buying their assets with tax payers money. The Chinese property market has collapsed and now a new property developer ZHENRO has said that it won't be able to make a upcoming bond payment (no surprise with sales down 41% YoY in Jan 2022).

What happens in China and Turkey in the coming days and months is what will decide what the global economic scenario looks like going forward. And unfortunately things don't look promising at all, with Turkey now requesting its citizens to deposit their personal gold with the government. Countries going bankrupt is the last thing the world need right now

[sgmuser]

I have friends in Colombo and the stories I hear from them are horrific. Essential commodities are in high demand and if available they are very costly, even milk, milk powder, dhal, rice etc. Forget about Petrol and Diesel for now for personal use. It is a disaster in SL now as per his personal experience. They never have seen anything like this. Tourism money completely lost for the last 2 plus years which is the biggest chunk of income for the people and government. Secondly, the Agriculture has been hit badly when the notorious announcement was made by Govt to ban fertilizers. What a beautiful country spoilt by politics and mis-governance!

[arijitkanrar]

Originally Posted by iamahunter

I understand the part of "help thy neighbors" but at what cost!?

Here in India we have been paying through the roof for that liter of petrol, major chunk which goes to the government as tax. Now that tax is apart from the tax that I've paid on my earnings!

This is tax payer's money which is being offered to the other country!

Why not pass this much subsidy to the people who have generated this money!

Its diplomacy to create trust and goodwill.
Being in one of the most dangerous neighborhoods in the world, we have to establish trust and goodwill with our neighbors.
Otherwise the same will be gladly done by our increasingly powerful northern neighbor and we will lose our startegic position in the Indian Ocean Region.

[M.Dua]

i am travelling to Srilanka in March end with family and friends, will you guys recommend otherwise? i just have ticket cancellation charges to bear as of now. This looks like a very sorry state

[am1m]

This is an eye-opener. I always assumed that since the civil war had ended, SL's economy must be poised to take off, the way ours did in the early 2000s. Was even wondering if there were any avenues for retail Indian investors like me to put in some early investments in their stock markets to perhaps see some of the kind of growth ours saw in those decades. But this picture is completely contrary. Any information on why. I mean they seem to have most of the advantages we have- workforce, natural resources, potential market. Is it a matter of economic liberalization, like we had to do in the 90s?

About offering to help, I think we pretty much have to, otherwise China is always ready to step in. I believe they have considerable infra investments there already.

[Raghu M]

Not to mention Sri Lanka's Chinese debt too. Without tourism, these countries can barely survive. This Black Swan (Covid) moment will be discussed for the next century. Feel really sorry for the people of SL. These countries should think of alternate sources of income. I think SA is doing the right thing by trying to move away from oil dependence but you can do that when you have a lot of cash. Countries like SL have very little options on the table.

[iamahunter]

Originally Posted by arijitkanrar

Its diplomacy to create trust and goodwill.

Well that's what I meant by understanding "helping thy neighbour"

Originally Posted by arijitkanrar

Being in one of the most dangerous neighborhoods in the world, we have to establish trust and goodwill with our neighbors.
Otherwise the same will be gladly done by our increasingly powerful northern neighbor and we will lose our startegic position in the Indian Ocean Region.

Srilanka is under heavy debt to China! Much more than what India has helped it with.

Trust and good will will be of no use when the decision will come from Beijing.

China has already done its part by occupying a few ports and infrastructure, and Srilanka would not be able to deny the access to it.

[condor]

Originally Posted by arijitkanrar

Its diplomacy to create trust and goodwill.

Help will be given, and negotiations done to get something in return. May not be big stuff in terms of value, but more about what can help us. Modi should be visiting Jaffna in the next one month. From what I hear, Palk Strait region is in India's eye, to secure ourselves in the area - and also the thorium deposits there which china is also eyeing. There is no such thing as free lunch, and one gives what the other wants to take what one wants.

[MSC]

The Srilankan government was already reeling under the heavy debt from China. They have even lost a sea port to them for 99 years. Their one airport had recently been termed as the "emptiest airport of world".
The COVID and associated lockdowns throughout the world meant the literal strangling of its cash cow that was Tourism. Without foreign tourists, it was always going to be hard for them.

[sierrabravo98]

Originally Posted by iamahunter

I understand the part of "help thy neighbors" but at what cost!?

Here in India we have been paying through the roof for that liter of petrol, major chunk which goes to the government as tax. Now that tax is apart from the tax that I've paid on my earnings!

This is tax payer's money which is being offered to the other country!

Why not pass this much subsidy to the people who have generated this money!

Your concerns, while genuine, are misplaced. India is not donating money to Sri Lanka. It's offering a Line Of Credit. That money will have to be paid back by Sri Lanka (indeed the interest rate is nil). In return, we are aiming to achieve 2 goals:

1.) Inhibit/Eradicate Chinese influence from a nation which is essentially, for all practical purposes, has the southern coast of our nation within light artillery range. Letting it slip into Chinese hands would be disastrous beyond imagination. 500 million USD worth of LOANS would seem to be a very small price to pay in that scenario.

2.) A long term aim is to ensure that we still maintain a chokehold over the shipping lines in Malacca region (in conjunction with the ANC) and the general IOR (Indian Ocean Region). The Chinese CANNOT be allowed to move strategic assets into that theatre when (not if) THE WAR happens. It would help to have the general Sri Lankan populace on our side (there is an anti-Indian sentiment among most of our neighbours for a variety of reasons which are beyond the scope of this thread). Such measures facilitate our efforts in that direction.

In general, it is not in our interests to have any of our neighbours in a situation in which the entire nation is poised on the precipice of economic collapse (except Pakistan of course. The poorer that country is the better for us) because China will move in to economically annex the nation before most Bengaluru denizens reach home from office (sorry, couldn't resist that).