Pre-entry criteria a drawback to lubricant industry

by Lalin Fernandopulle

The lubricant industry, a government owned business venture under the Ceylon Petroleum Corporation (CPC) has to follow practically an impossible entry criteria to the market, though development of local industries has been the focus in the 'Mahinda Chintana' Chairman, Laugfs Holdings Ltd. W. K. H. Wegapitiya said.

Laugfs Lubricants was one of the 14 companies that responded to the recent request by the Public Enterprise Reforms Commission (PERC) to qualify to enter the local market under the liberalisation of the lubricant market.

Though Laugfs Lubricants has a very good chance to enter the lubricant market specific pre-entry criteria imposed were unreasonable. We have voiced our grievances and protested against the unfair regulations hindering the growth of local industries.

Such rigid and unrealistic criteria dampens the enthusiasm and potential of local entrepreneurs, Wegapitiya said. Needing five years lubricant business experience either local or foreign, holding API and OEM accredited quality certifications for at least one brand owned within the last five years and requiring Rs. 785 million to be in a bank account to enter blending are the excessively high pre-entry criteria that obstructs lubricant entrepreneurs from entering the market.

Asked why the pre-entry criteria imposed were excessively high, Wegapitiya said we do not understand the logic behind it. It says it is to ensure that only those who are genuinely interested to be permitted to enter the market and safeguard the interest of the consumer assuring quality standards.

Our question is to satisfy the quality requirements why do they need a pre-entry criteria. PERC clearly states that no selected entity under this process will be allowed to market their products unless they obtain an API certification in the interim. Why is it necessary to have a pre-entry criteria on that?

PERC may have thought in this manner because locally blended lubricants having a larger market share of 60 percent have been sold without the API certification for at least 10 to 15 years.

How could someone ask for experience in the lubricant business when the industry was virtually closed all these years. The investment required depends on the volume, market share, quality of machinery and other vital components, he said.

This doesn't mean that the entry criteria should be done away with. It is absolutely necessary for evaluation of prospective entrants but it has to be reasonable and achievable in the business environment. It must ensure that prospective entrants qualify. The manner in which it is being drafted no local company who intends promoting their own brand and blend lubricants can enter the fray.