Friday, June 21, 2024

Proposals to flush out foreign currency

1) Ceylon Petroleum Corporation (CPC) now sells diesel,
furnace oil and kerosene to companies who buy large
quantities and pay in dollars. Why not make this facility
available to individuals who wish to buy petrol and pay for it
in foreign currency?
Here’s how it will work: A state bank which opens LCs for
CPC sets up a cash counter at a CPC petrol shed which can
provide a small office space free of charge. Customers
approach the desk with any acceptable foreign currency
(FCY) in cash which the Bank Officer will convert to Rupees
at the day’s buying rate and issue a token with the amount
noted. The customer takes it to the demarcated petrol pump
and fills up to the value shown in the receipt. The Bank
Officer will take the entire FCY note and will not give back
any change which is in excess to the amount required for the
fuel. Instead he will issue a credit note for the balance which
can be used another day. It would be better if the FCY
exchange takes place at any branch of the designated bank
which issues the tokens which the customers take to the
petrol sheds which have been set aside for FCY sales. Such
sheds should not cater to other customers (including
essential services) and attend to FCY token holders only.
There should not be any sales in local currency. The Bank
should ensure that the tokens are tamper-proof and printed
on special security paper.
If implemented this will flush out most of the FCY in the
hands of the populace. Truly it may create a black market

demand for FCY as customers who do not have FCY notes
will want to buy them. Still the FCY in the hands of people
will reach the Govt coffers one way or another. This will, on
the other hand, help to kill the black market for fuel which
now sells for 3-4 times the price, as the demand decreases.
CPC should try out this system in two or three locations, first
in and around Colombo.
2) Import of vehicles has been banned. Yet the country needs
new vehicles as the old petrol/diesel vehicles now in use
become irreparable. In order to do away with the demand
for petrol the country can permit the import of electric
vehicles only, if paid for by a benefactor overseas without
involving any remittance of FCY by the beneficiary. However,
all local expenses connected with the import of the vehicle
such as customs duties, taxes and warehousing charges
should be paid in FCY and not in Rupees. This payment may
be made by the importer using funds in his FCY account/s
with banks or paid by the benefactor again. A proviso could
be that the premises of the importer should have solar
power installed so that there is no drain on the electricity
provided by the national grid for charging the electric
vehicle. Funds in FCY accounts of customers are not available
to the Govt. This proposal would release such funds to the
Govt treasury.
Viraj Fernando

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