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Fuel price hike; LIOC says not enough

18 Mar 2019

Lanka IOC (LIOC) has expressed disappointment over the Government’s recent fuel price revision through the fuel price formula, as revised local fuel prices are much lower than the current global oil prices. Speaking to The Sunday Morning Business, LIOC Managing Director Shyam Bohra stated that the revised prices do not match the price fluctuations in the global market. “This price revision does not reflect international oil prices. There is a huge difference in diesel,” Bohra said on Wednesday (13). The Ministry of Finance, following the passing of the second reading of the Budget 2019, announced hikes in fuel prices with effect from Tuesday (12). Accordingly, the price of a litre of 92 octane petrol was increased by Rs. 3 to Rs. 132 and 95 octane petrol by Rs. 7 to Rs. 159, while the price of a litre of super diesel was increased by Rs. 8 to Rs. 134 and auto diesel by Rs. 1 to Rs. 104. Following the price increase by its competitor Ceylon Petroleum Corporation (CPC), LIOC too increased its prices to match the CPC's prices with effect from midnight on Wednesday (13), apart from two products which were raised beyond the CPC's prices. Accordingly, the price of a litre of 95 octane petrol was increased to Rs. 162 while the price of a litre of auto diesel was increased to Rs. 113. Bohra said that the fuel price formula had deviated from its rationale of reflecting changes in the global oil market. “If the pricing mechanism is in place, whatever the formula is there has to be implemented, but that has not been done,” he stated. He added that subsidising fuel prices beyond a pricing formula was extremely dangerous for the country’s economy. Earlier this year, Bohra told The Sunday Morning Business that the fuel price formula was “unscientific” as the revisions were not being undertaken according to any proper scientific method. For the quarter ended 31 December 2018, LIOC lost Rs. 986 million compared to the Rs. 340 million in losses in the corresponding period in 2017. In the same period, LIOC’s gross profit fell to Rs. 67 million from Rs. 277 million a year earlier. Backed by the International Monetary Fund (IMF), Minister of Finance and Mass Media Mangala Samaraweera introduced the fuel price formula in May 2018 to reflect fluctuations in the global oil prices, local costs involved in pumping, storing and maintenance, and the taxes levied on crude and refined fuel imports. Since the introduction of the formula, fuel prices were revised 15 times, including the three reductions that took place during the 51-day Government. When revising fuel prices each month, the Government does not base its monthly revisions on the global oil prices on the day prior to the revision, but instead on the average of the global oil prices from the previous fuel price revision to the day prior to the upcoming revision. Despite a significant increase in global oil prices in January, Sri Lanka reduced the price of a litre of 92 octane petrol by 1.6%, 95 octane by 1.3%, auto diesel by 2%, and super diesel by 2.5%. However, following further increases in global oil prices, in February, the price of petrol octane 92 had been increased by Rs. 6 per litre and petrol octane 95 by Rs. 5 per litre. The price of auto diesel had been increased by Rs. 4 per litre and super diesel by Rs. 8 per litre.

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