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Fuel price formula after full Cabinet

22 May 2022

  • Authorities actively engaging in formulation 
  • Discussions held post new PM appointment: CPC
  • LOLC says formula will be ‘transparent’ and ‘wonderful’
The Ministry of Power and Energy is currently in the process of formulating a new pricing formula for fuel, however the decision to implement the formula now lies entirely with the Cabinet of Ministers, which is yet to be fully appointed, The Sunday Morning Business learns.  According to a spokesperson from the Ceylon Petroleum Corporation (CPC), the relevant parties, including Ministry of Power and Energy officials, had held a discussion on swift implementation of the formula, after the appointment of the new Prime Minister. The CPC told The Sunday Morning Business that implementation was now entirely in the hands of the Cabinet. Suggestions from both the CPC and Lanka Indian Oil Corporation (LIOC) have been obtained in formulating this pricing mechanism, the enterprises stated.  LIOC Managing Director Manoj Gupta told The Sunday Morning Business that the fuel price formula was very much on the cards and added that the variables were being discussed. “I am pretty sure that this formula is going to be one of the most wonderful things that is going to happen to our country. It will be a transparent and accountable formula. Anyone can understand the basic landed cost, statutory cost, pipeline charges, landed cost of the fuel, the exchange rate of the dollars, and whatever the other little things involved. It will be the most accountable and realistic formula,” Gupta stated.  Further, he noted that a formula was the need of the hour: “We pray that it will be implemented soon, otherwise we are losing more than Rs. 100 per litre of gas oil. We are losing about Rs. 70-75 per litre on gasoline now. Gasoline has started to go very high in the international market,” he stated.  University of Colombo Department of Economics Senior Professor Sirimal Abeyratne in November last year opined that the way forward should be the fuel pricing formula. “We have been trained to believe that the Government can control prices, especially prices of oil that we have to import from oil-producing countries. In fact, today, we are in a very difficult situation because oil prices have gone up four times compared to prices from about one-and-a-half years ago. Somebody has to bear this cost whereas our taxpayers’ money is not enough to pay that.” Under the United National Front-led administration, then Finance Minister Mangala Samaraweera introduced a fuel pricing formula, which was scrapped after the Sri Lanka Podujana Peramuna-led Government came into power. However, in November 2021, a report issued by the Central Bank of Sri Lanka (CBSL) called for the reintroduction of a fuel pricing formula, noting that it was essential for the financial viability of the CPC and in turn, the stability of the banking sector. The CPC has struggled, especially in 2022, to import the necessary fuel stocks, due to a lack of funds for imports and a difficulty in opening letters of credit for imports, pushing the State institution into further debt.   – Tanya Shan  


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