REVIEW OF THE REGULATORY

ENVIRONMENT

FROM INDUSTRY PLAYERS PERSPECTIVE

Market overview

Currently, there are 14 licensed players, comprising of Multinational, Regional and Local players including a state owned company. Market size is 55 mil liters as per 2010 PUCSL report

2 players have local manufacturing facilities and one player does local re-packing

3 players have their own captive channels and all other players have equal rights to sell products thru other channels such as service stations, spare parts shops etc

Most government accounts are on Annual Tenders. i.e. CTB, CEB, Armed Forces etc

The lubricants industry faces many challenges under the present local regulatory environment.

Petroleum Industry Act, which granted power to the Public Utilities Commission of Sri Lanka to regulate the market, has not been enacted to date

Regulatory power under the Ministry of Petroleum creates a conflict of interest since Ceylon Petroleum Corporation competes with the other license holders

Issues needing immediate regulatory intervention

1. Direct importation of lubricants by non-licensed parties

Hyundai Engineering has been granted permission to directly import Lubricants for their own consumption. The brand imported is “SK Lubricants - Korea”. (1 million per annum for 2 years now)

Lalan Group of companies directly import Thermic/Heat Transfer Oil (>90 % base oil content) for their own consumption and its customers consumption - over 100,000 litres annually

it has been the practice to permit such direct importation if and when the licensed players did not market these products locally

Recommendation;

Introduce a mechanism to allow licensed players to supply such projects on duty-free basis

Issues needing immediate regulatory intervention

2. Product Adulteration and Re-packing (estimated to be > 5% of total market)

Product Adulteration takes place in many different forms;

1 Mixing of original products purchased from licensed players with cheap solvents and sell as genuine products of licensed parties under the same brand

2 Mixing of original products purchased from licensed players with cheap solvents and sell as genuine products without branding.

3 Cheaper brands filled into expensive branded drums and deceiving the retailers and /or customers

4 Filtering of used oils and mixing with solvents

5 Re-packing of licensed players products and sold under re-packers name

Process of Product Adulteration and Re-packing

Other areas needing regulatory attention

Independent laboratory facilities to check the quality of lubricants imported to ensure

conformance with the approved specs.

Bringing Automotive products under a licensing process to ensure only quality

products reach the market. E.g. Brake fluid, Coolants etc

Consumer awareness on lubricant quality standards

Educate the Customs Dept to ensure strict compliance with quality standards

Amendments to the IPR law and effective implementation

Independent regulatory unit to monitor the product adulteration and other illegal

activities to bring them to book

Follow a proper process to issue no objection letters to parties who have a need to

import lubricant products that are not marketed by the licensed players currently

Direct importation of Genuine oil by independent unlicensed parties

Minimize toxic gas emissions by replacing kerosene with high flash low aromatic

(HFLA) solvents

The business case for proper industry regulation

Revenue opportunity to the Government covering over 5 million liters incremental volume

Taxes and duties, sales commission, VAT, local taxes

Honoring the obligation to the licensed players by the regulator

Secure the rights and interests of the legal players in a very small market

Safeguard Consumer rights & interests

Awareness, right product, protection of their wealth, safety

Economic impact & competitive investment climate in SL

Minimize foreign currency drain out and negative perception as an investment destination

Environmental protection/stewardship

Eliminate hazardous waste disposal damaging the environment & causing

health issues . Reduce air pollution & eliminate potential health hazards

More unlicensed players than licensed players - 17 vs. 14

Name & Address Evidence Remarks

1 STAR by Star Line Enterprises –

Panadura Re-packer

2

A.R.Marketing (known to be the

distributor of STAR Grease) -

Panadura

Re-packer &

Adulterator

3 ABRO Industries INC (Indiana, U.S.A) local distributor unknown

Importer

More unlicensed players than licensed players cont…

Name & Address Evidence Remarks

4 Cobra 1 by Cobra International Ltd - Bekkegama

Re-packer

5 Eagle Grease by K. B.Marketing - Panadura

Re-packer

6

Engine Oil (multi-vehicles) – Non branded generic product. No distributor details mentioned on pack

Adulterator

Name & Address Evidence Remarks

7

Engine Oil (SAE40) - Non branded generic product. No distributor details mentioned on pack

Adulterator

8 EXACT power steering fluid by D.A.R.

Marketing – Ethulkotte, Kotte Re-packer

9 Waxpol by Waxpol Industries Ltd Importer

More unlicensed players than licensed players cont…

Name & Address Evidence Remarks

10 Hero Marketing - HM Hub & Axel - Wellampitiya

Re-packer

11 IR Solid Grease Re-packer

12 HUB Grease by Turbo 1 Lanka Marketing,

Panadura. Re-packer

More unlicensed players than licensed players cont…

Name & Address Evidence Remarks

13

Royal Super (grease & power steering fluid) by Royal Marketing Company - Panadura

Re-packer

& Importer

14 STOP by Chemanex PLC – Galle Face

Court 2, Colombo 3. Importer

More unlicensed players than licensed players cont…

Name & Address Evidence Remarks

15 STR by R.F. Marketing Services (Pvt) Ltd. - Panadura

Re-packer

& Importer

16 Super multi-purpose grease – No distributor details mentioned on pack

Re-packer

& Adulterator

17 Three Star Quality Grease by Sanjeewa

Industries

Re-packer &

Adulterator

More unlicensed players than licensed players cont…

Market penetration by illegal operators

Market penetration by illegal operators

Thank you