Lanka's economic crisis: Days-long queue just for a litre of fuel

In many parts of Sri Lanka, the serpentine queues outside fuel stations stretch for several kilometres. The waiting time is now measured not in hours, but in days. Motorists have camped outside filling stations, sitting and even sleeping in their vehicles in hopes that a fuel tanker will arrive. Some motorists have waited in line for more than a week.

Yet on Monday night (June 27), they were told that only vehicles classified as those from “essential services” would be issued fuel until July 10.

Such is the depth of the crisis that only medical staff and security forces personnel can buy fuel from June 27 to July 10. Bus services between the country’s provinces too will be suspended owing to restrictions in fuel supply, Cabinet Spokesman Minister Bandula Gunawardena said. Train services remain unaffected for now. Nevertheless, the restrictions mean the country will be partially shut down for at least 13 days.

Minister Gunawardena claimed measures have been taken to ensure uninterrupted supply of fuel and cooking gas from July 10. The claim is unlikely to elicit much confidence from a populace who have seen such assurances come to nothing in the past few months.

The assurances that the government was on top of the problem rang hollow, especially considering that hours before the announcement, it had implemented a token system to distribute fuel to motorists. The scheme was being implemented by the military. Motorists’ contact details are taken down and they need to show respective tokens when a fuel bowser arrives at the station. Just what happens to this scheme after the announcement that fuel will only be issued to essential services remained unclear as of Monday night.

At least 12 people have died in fuel queues so far, with the latest victim being a 19-year-old who was killed when a truck collided with his motorbike as he was waiting in a queue on June 24.

Even before Monday’s announcement, work in some sectors had already been curtailed owing to fuel shortages. Schools in Colombo and other major urban centres had been closed throughout last week to save fuel, with students going back to online learning system that was in place during COVID. Those schools were due to reopen for three days of the week from June 28 but the Education Ministry scrapped the move after the Power and Energy Ministry said it could not guarantee fuel distribution. Schools in urban areas will now remain closed until July 10.

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Government offices too have been ordered to function with only the minimum number of essential staff required until further notice. Much of the 1.5 million government workforce is to work from home. The private sector has been requested to do the same.

Meanwhile, the duration of daily power cuts that have been in place for much of the year was again increased from 2 ½ hours to 3 from Monday (June 27) owing to a shortage of fuel for diesel power plants. There are fears the power cuts will lengthen further.

The crippling fuel shortage is the result of the worst economic crisis in Sri Lanka’s history. Its severely depleted foreign exchange reserves have left the country unable to import essentials including fuel, cooking gas, food and medicines.

A cargo vessel carrying 40, 000 metric tonnes (MT) of petrol had been expected to dock in Colombo on June 23, but Power and Energy Minister Kanchana Wijesekara tweeted on Saturday (June 25) that petrol, diesel and crude oil shipments scheduled for the next two weeks would not arrive due to “banking and logistic reasons”.

Essentially, fuel suppliers no longer trusted Sri Lanka to meet its payment obligations, Mr Wijesekara told the media during the press conference on Sunday (June 26). State-owned fuel retailer Ceylon Petroleum Corporation (CPC) owes US$ 735 million in unpaid fuel bills. As such, no supplier is willing to send their shipments to Sri Lanka now unless payment is made in advance.

Though fuel stocks have virtually run out, the price of fuel still increased significantly again effective from June 26. Both the CPC and its competitor Lanka Indian Oil Company (LIOC) raised diesel prices by 15 per cent to Rs. 460 while petrol was hiked 22 per cent to Rs. 550.

The government had tried to keep the country moving by prioritizing fuel distribution to public transport and those essential services, but this has not met with the desired success so far. A move to prioritize fuel distribution to medical staff from selected filling stations on Fridays mostly failed last week as the decision had not been properly communicated to the stations, resulting in doctors, nurses and other healthcare workers waiting in line for hours. The shortage has already affected work in some government hospitals, with staff being unable to report for duty. Several hospitals have decided to only operate emergency services until further notice.

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Sunday’s fuel hike has resulted in a further increase in the prices of many goods and services. Private bus operators, who account for the majority of buses operating in the country, have demanded an immediate 35 per cent tariff increase. Autorickshaw drivers have also increased their fares while container transportation charges have gone up by 10 per cent. The price of restaurant meals and takeaways has also increased.

For the last two months, Sri Lanka had largely relied on a $500 million credit line from India to import fuel, but this has now run out. Discussions on securing another Indian credit line are now ongoing, but as Prime Minister Ranil Wickremesinghe noted, India too has its limits.

“We have taken loans amounting to US$ 4 billion under the Indian credit line. We have requested more loan assistance from our Indian counterparts. But even India will not be able to continuously support us in this manner. Even their assistance has its limits. On the other hand, we too must have a plan to repay these loans. These are not charitable donations,” Mr Wickremesinghe told Parliament on June 22.

The only option before the country is to hold discussions with the International Monetary Fund (IMF) on reaching a staff-level agreement, the premier said. A visiting IMF team held discussions with President Gotabaya Rajapaksa, PM Wickremesinghe and other key ministers and officials last week.

A delegation from New Delhi, led by Foreign Secretary Vinay Kwatra, Secretary, Department of Economic Affairs Ajay Seth, Chief Economic Advisor V. Anantha Nageswaran and Joint Secretary to the Indian Ocean Region Division at the Ministry of External Affairs Kartik Pande, also visited Colombo on Thursday for talks.

With time running out, the government is now scrambling to obtain assistance to procure fuel. Ministers are being dispatched to Qatar and Russia to negotiate for assistance to obtain fuel. On Monday (June 27), Sri Lanka’s High Commissioner in New Delhi Milinda Moragoda met with Union Minister for Housing & Urban Affairs & Minister for Petroleum and Natural Gas Hardeep Singh Puri.

Meanwhile, a high-level delegation from the US Department of Treasury and Department of State are also on the island from June 26 to 29. “In all their meetings, they will explore the most effective ways for the U.S. to support Sri Lankans in need, Sri Lankans working to resolve the current economic crisis, and Sri Lankans planning for a sustainable and inclusive economy for the future,” said the US Embassy in Colombo.

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As diplomatic initiatives continue, many citizens now face the prospect of trying to live their lives without fuel for at least the next two weeks. The government has not been able to explain how it intends to compensate daily wage earners who will be affected by the new restrictions. The economic crisis has left them without a safety net.