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Fuel price hike: Masses hit hard as prices reach record highs 

23 Apr 2022

  • Soaring cost of fuel fuels unrest
  • Citizens under unprecedented strain
  • NMCRP calls for CAA intervention on price controls
  • Fuel price hike will lead to commodity price hikes: EFCITA
By Maneesha Dullewe   As households across the island face rising prices amidst Sri Lanka’s ongoing cost of living crisis, the State-run Ceylon Petroleum Corporation (CPC) once again raised its prices with effect from midnight Monday (18), a day after Lanka IOC (LIOC) did so. Accordingly, CPC has increased the price of 92 octane petrol by Rs. 84 per litre, 95 octane petrol by Rs. 90 per litre, super diesel by Rs. 75 per litre, and auto diesel by Rs. 113 per litre. Meanwhile, LIOC has increased the prices of petrol by Rs. 35 per litre and diesel by Rs. 75 per litre.  While the average employee’s pay keeps falling behind inflation, which hit 18.7% in March, the Sri Lankan economy continues its tailspin, and with fuel, energy, and food prices on the rise, thousands of citizens have taken to the streets to demand change. In a situation where rising costs have not resulted in increased salaries, households across all sectors are struggling to cover basic household expenses such as electricity, water, and food given the depreciating purchasing power of the rupee.  Speaking to The Sunday Morning on the plight faced by the ordinary consumer under these circumstances, National Movement for Consumer Rights Protection (NMCRP) Chairman Ranjith Vithanage said that the present fuel price increase was unprecedented in Sri Lanka’s history, with consumers now having to spend increasingly more on travel. “In addition to direct impacts of fuel price increases, there have been indirect impacts in the form of commodity price hikes. The prevailing unrest in the country is because consumers are simply unable to bear these cost increases.” Price controls With the cost of living strains caused by fuel price increases further compounded by shortages in commodities, Vithanage stressed: “We ask the Consumer Affairs Authority (CAA) to intervene in this situation. Price controls were previously removed by the Government, claiming that prices should depend on demand and supply. However, in a situation where there is a shortage, it is unfair on the consumer to permit prices to be determined by demand and supply. Therefore, we ask the minister in charge to intervene and impose a control price on certain essential goods, ensure that quality standards are monitored, and enforce the law strictly with regard to quantities and punish unscrupulous traders.”  He added: “Since there is no way of increasing the consumers’ income at the moment, the CAA intervening in this situation would provide a certain degree of relief to the consumer.”  Noting that these were measures that should be taken to resolve cost of living strains that added to the fuel pricing woes, Vithanage acknowledged however that there was no similar solution that could be provided for increasing fuel prices, which also directly contribute to the rising cost of living. “The Government itself will have to reduce prices and provide fuel concessions for the public transport sector, while ensuring measures to control the prices of essential goods,” he said. “The fuel price increase has led to an extremely grave situation, which has had a collective impact on all citizens. The more people who are affected, the more serious the situation will become, unlike issues which only affect a few. The present unrest is due to this issue affecting everyone across the board.”  Moreover, consumer rights activist Asela Sampath also noted that owing to the increased prices, consumers were being taken advantage of by unscrupulous traders and public transport providers, as the public was being charged exorbitant prices in excess of what could be reasonably borne under the circumstances.  However, an official from the CAA, who wished to speak on conditions of anonymity, told The Sunday Morning that implementing price controls would simply exacerbate prevailing commodity shortages. Hard truths Meanwhile, addressing the issues faced by importers due to the fuel price hike, Essential Food Commodities Importers’ and Traders’ Association (EFCITA) Spokesperson Nihal Seneviratne said that while the impacts of this would be felt across the board, transport costs would inevitably increase. However, he noted that the impact of fuel price hikes would be minimal compared to the massive depreciation of the rupee, which would be the primary cause behind commodity price increases for importers.   Explaining the economic realities of the prevailing situation, Economist Rehana Thowfeek noted: “The rupee has further depreciated since the float came into effect and another fuel price increase has been announced. Along with the fuel price hike, the prices of flour and other products were also revised. Therefore, I think we can expect inflation in April to exceed 20% given the lagged effects of broad money expansion and the continuous forex shortage. Prices of food will be significantly impacted as supply chain costs like container fees have also been revised upwards. There are also shortages in domestic production due to fertiliser shortages and bans. Therefore I expect food inflation to exceed 35% in April. “This is very high inflation, especially in the backdrop of reduced production activity and reduced incomes – it is unbearable to many. The country is going through a very difficult period due to the debt crisis. Some form of social assistance programme (cash and/or in-kind) is vital to support poor and vulnerable groups, but the fiscal space for it needs to be created by slashing unwanted government expenditures and increasing Government revenue through taxation – this is urgent step that needs to be taken by the Government to protect our most vulnerable citizens.”  Attempts by The Sunday Morning to reach Ministry of Trade Secretary Bhadranie Jayawardhana for comment proved unsuccessful.   

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