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No fuel pricing formula in the pipeline 

23 Dec 2021

  • Energy Secretary says no such plans despite recent price hike 
  • No immediate plans for a fuel price stabilisation fund either 
  BY Buddhika Samaraweera  The Ministry of Energy has no plans at present to introduce a pricing formula to determine fuel prices, despite the second hike in fuel prices for the year taking place earlier this week. Speaking to The Morning on Wednesday (22), Ministry of Energy Secretary K.D.R. Olga, however, said that discussions are underway to formulate some mechanism, of which the exact nature is yet to be decided, through which the adverse effects of changes in fuel prices on the people can be minimised. Co-Cabinet Spokesperson and Minister of Media Dullas Alahapperuma said on Tuesday (21) that when the late Mangala Samaraweera introduced the fuel price formula, Opposition MPs, who are in the current Government, criticised and ridiculed it, but that the value of the formula is now evident.  “It is not a secret that the price formula would have been favourable to both sides in such an instance of a price change,” he said.  Minister of Energy Udaya Gammanpila on 26 November proposed a return to a fuel pricing formula, whilst also suggesting a fuel price stabilisation fund would be better suited for the island. The Minister said that with the Treasury unable to provide funds, a fuel price stabilisation fund should be the way forward, with the fund bearing the brunt of the impact, during the good times as well as bad times. Earlier, Minister of Justice M.U.M. Ali Sabry PC, speaking in Parliament during the debate on the second reading of the Budget, on 16 November, said that he is in agreement with the recent proposal put forward by the Central Bank of Sri Lanka (CBSL) to reintroduce a fuel pricing formula and requested Minister of Finance Basil Rajapaksa and the Government to consider the proposal.  Explaining further, Sabry said that he believes Sri Lanka must once again implement a system which allows the price of fuel to fluctuate in accordance with fluctuations in world market prices. “When paying tax ultimately, it is paid from the money of all the people including the poor. Therefore, it is unreasonable to utilise public funds to cover the petrol and diesel of those who can afford to use a petrol or diesel car. That subsidiary is not suitable,” added Sabry. On 10 November, the CBSL released a report titled “Recent Economic Developments: Highlights of 2021 and Prospects for 2022” where they proposed that considering the volatility observed in global energy market prices, the adoption of a suitable cost reflective pricing mechanism for fuel was appropriate. Moreover, the CBSL claimed that such a mechanism will be vital to ensure the financial viability of Ceylon Petroleum Corporation (CPC) and thereby the stability of the banking sector, considering the current external environment. The CBSL further added that such a pricing mechanism would also “improve transparency and thereby improve the general public’s acceptance of much-needed regular price revisions in relation to these imported products”. Meanwhile, Olga also told The Morning that it is not possible to set up a fuel price stabilisation fund at present due to the rising fuel prices in the world market. She added that the Cabinet of Ministers had given its principle approval to set up a fuel price stabilisation fund following a recommendation made by the Cabinet Sub-Committee appointed to look into the issues of CPC. However, she said that it is not practical to set up such a fund due to the rising fuel prices in the world market.  “One of the recommendations made by the Cabinet Sub-Committee was to set up a fuel price stabilisation fund, but it is not practical to set it up at a time when fuel prices in the world market are rising. It can only be set up when there is a decline in prices,” she said. The CPC announced that the fuel prices have been increased with effect from 21 December. Accordingly, the price of a litre of 92 Octane petrol, which was Rs. 157, has been increased to Rs. 177 by Rs. 20, while the price of 95 Octane petrol has been increased by Rs. 23, from Rs. 184 to Rs. 207. The price of auto diesel has been increased by Rs. 10 per litre, bringing the new price from Rs. 111 to Rs. 121. The price of a litre of super diesel, which was Rs. 144, has been increased by Rs. 15, making its new price Rs. 159. The price of kerosene has also been increased by Rs. 10, from Rs. 77 per litre to Rs. 87. In addition, the Lanka Indian Oil Corporation (Lanka IOC) has also increased fuel prices.


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