brand logo

Committee to be appointed to determine fuel prices 

05 Dec 2021

  • Energy Min. Additional Secy to chair committee
  • Petroleum Act to be amended to establish committee
    By Yakuta Dawood  The Ministry of Energy will be establishing a new “Fund Management Committee” under the Fuel Price Stabilisation Fund to determine fuel prices in Sri Lanka, The Sunday Morning Business learns.  Speaking to us, Energy Minister Udaya Gammanpila stated that, regardless of the approval given by the Cabinet to proceed with the Fuel Price Stabilisation Fund, it could not be implemented any sooner, as the current economic status was not viable. Therefore, the Ministry is currently in process of amending the Petroleum Development Authority (PDA) Act, after which a committee will be appointed to determine the prices. “The Fund Management Committee will be chaired by an additional secretary of the Ministry of Energy and will comprise officials such as the Director General of Fiscal Policy, representatives from Ceylon Petroleum Corporation (CPC) and Lanka Indian Oil Corporation (LIOC), economists and statisticians appointed by the Ministry of Energy, and nominees from the Ministry of Transport and  Fisheries,” Gammanpila said. Adding, Gammanpila disclosed that the chairman of the committee and the other officials were not appointed as yet and would only be designated after the PDA, presently at the drafting stage, was amended. “Currently, the fuel prices are determined by the Ministry of Energy and the Ministry of Finance, but after the amendment of the Act, the decision will be taken by the committee,” Gammanpila added. However, explaining the reason why the Ministry is unable to establish the Fuel Price Stabilisation Fund at present, the Minister stated that this fund had only two sources of income – firstly, when the global prices are low, and secondly, when the Ministry of Finance decides to allocate sufficient funds. Unfortunately, both of these sources of income were not feasible at present. Therefore, according to Gammanpila, the Fuel Price Stabilisation Fund was on hold and would be established after the amendment of the PDA.  On 26 November 2021, the Cabinet of Ministers granted approval for the establishment of the Fuel Price Stabilisation Fund after it had been temporarily suspended due to the recovery of global oil prices. The Ministry of Finance imposed an additional duty per litre of fuel sold by LIOC and the CPC following the local outbreak of the pandemic, as the Government decided to maintain fuel prices despite the historical drop in global oil prices. Therefore, the aforementioned establishments were able to sell oil with a widened profit margin. This additional duty was channelled directly to the Fuel Price Stabilisation Fund. Commenting with regards to this, Treasury Secretary S.R. Attygalle told The Sunday Morning Business that this additional duty was lifted temporarily when global oil prices were returning to its previous levels. “I cannot remember the exact day we lifted this duty. When the global oil prices went up again, we discontinued this charge,” Attygalle said. According to Attygalle, the fund had raised about Rs. 50-60 billion within six months, which was significantly less than the initial intention of the Government to collect Rs. 200 billion during the same period.  “There is no money in the fund at the moment. We paid some fuel dues to the Central Bank of Sri Lanka. We lent the rest to the Ceylon Electricity Board (CEB) to settle their outstanding payments to the CPC. It is yet to be recovered,” he added. Expressing similar thoughts, in June 2021, a top source at the Ministry of Energy told The Sunday Morning Business that the said fund, which had accumulated between Rs. 18 and Rs. 20 billion at one point, was currently empty. The fund had been used to settle outstanding payments owed by the CEB to the CPC. Thereafter, the relevant amount was used by the CPC to settle a loan due to Bank of Ceylon (BoC) and People’s Bank. “Due to these loan repayments, the expected objectives of setting up the fund could not be achieved,” ministry sources said at the time.


More News..