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Key players in the Sri Lankan shipping industry have warned that the implementation of a new tax on bunker fuel would lead to an increase in prices and result in the local market being uncompetitive.

The maritime firms have begun lobbying for the withdrawal of the five percent Ports and Airports Development Levy (PAL), which had been due to come into force in January, but its implementation is said to have been held back.

Devika Weerasinghe [pictured], chief financial officer (CFO) at John Keells Holdings - owner of bunker supply subsidiary Lanka Marine Services (LMS) - is quoted as saying that the new tax would be a "huge foreign exchange loss to the country".

"Export revenue from bunker supplies is quite significant. So if ships stop bunkering, we'll lose foreign exchange," she told a forum organized by tax specialists KPMG and the Chartered Management Institute, a body for management professionals.

"If the five percent PAL is imposed it will totally take away the margins," she added.

Ralph Anandappa, chairman of the Ceylon Association of Ships’ Agents, said the levy on bunkering services would make them uncompetitive.

"We like to see PAL being withdrawn totally on bunker supplies to foreign ships. Bunkering brings about 800 million rupees a year to the country of which 750 million rupees goes to the government and the rest to other stakeholders."

Anandappa warned that the implementation of PAL on marine fuel would force bunker suppliers to raise their prices as margins were thin, thus making them uncompetitive.

"It also has additional effects on the industry. Ships' agents will be affected. All other services in Colombo port will be affected if ships do not call for bunkers."

Image: Devika Weerasinghe, chief financial officer (CFO) at John Keells Holdings.