• Fuel distributors stop new orders, warning of shortages tomorrow 
• Panic buying escalates as public fears fuel shortage
• CPC reassures public of sufficient fuel reserves despite protests
• Petroleum dealers suspend credit to Govt. institutions
• Govt. defends pricing formula, rejects calls for higher profits
• Fuel distribution as usual at LIOC, Sinopec, RM Parks stations: Min.

Long queues at fuel stations have been reported across the country since last Friday (28 February) night, as a growing dispute between fuel distributors and the Government intensifies. 

The situation is expected to worsen over the next few days, with fuel distributors warning of a complete fuel shortage by tomorrow (3) due to their ongoing protests.

The Petroleum Dealers’ Association has vowed to halt new fuel orders following the Government’s decision to abolish the 3% profit margin previously added to fuel prices. 

The protest has triggered panic buying, with many consumers rushing to fill up their tanks, fearing a shortage. Despite these actions, the Ceylon Petroleum Corporation (CPC) has attempted to reassure the public that there were sufficient fuel reserves in the country.

However, the association has made it clear that no new fuel orders will be placed and that post-payment fuel supplies to Government institutions, such as the Police and hospitals, will be suspended. 

The distributors argue that the new payment formula, which cuts into their profit margin, is unsustainable, especially given the high investment costs involved in running fuel stations.

Fuel distributors have confirmed that they will continue their stance of halting new orders, despite the Government’s agreement to meet with them on Tuesday (4). A spokesperson for the Petroleum Dealers’ Association expressed strong opposition to the Government’s decision to remove the 3% profit margin added to fuel prices.

In a media briefing, Petroleum Dealers’ Association Vice President Kusum Sandanayake explained that the existing fuel stocks at stations would only last until tomorrow (3) morning due to the suspension of new orders from Friday night.

The association stated that no new orders had been placed with the CPC for fuel distribution starting yesterday (1). It also announced that fuel ordering would cease from midnight on Friday (28 February), leading to a complete shortage of fuel at filling stations by tomorrow. 

The association’s Central Committee has scheduled a protest at the Presidential Secretariat later today (2).

The CPC’s decision to abolish the 3% discount given to distributors and implement a new payment formula is set to take effect tomorrow (3).

“We will sell off all the fuel we have already purchased, but we will not be placing any new orders due to the unfair treatment we have faced,” the association said. 

“It is becoming increasingly difficult for fuel station owners to continue operating under these conditions,” a representative added.

He further explained that private distributors faced significant costs, including maintenance expenses, which they needed to cover to keep their businesses afloat. “Under the current system, a fuel station that handles 15 deliveries of petrol would only make around Rs. 62,300 in profit, which is simply unsustainable,” he stated.

Meanwhile, Fuel Station Owners’ Association (FSOA) President Kumar Rajapakshe expressed concerns to The Sunday Morning about the fairness of the recent price formula proposed by the CPC. 

He argued that the formula did not take into account the significant investments made in prime locations across the country, which were critical for their expected Return on Investment (ROI).

“We have invested millions of rupees in these properties,” Rajapakshe said, noting that there were two types of fuel stations: those owned by the CPC and those that were privately owned. He emphasised that privately owned stations were the most affected by the new formula.

However, Rajapakshe pointed out that fuel stations operated by Lanka IOC (LIOC), RM Parks Ltd., and Sinopec had decided to maintain the 3% commission for distributors, ensuring no issues with fuel supply at those stations. 

“We anticipate shortages and we have been asked to meet with them on Tuesday (4),” he added.

However, CPC Chairman D.J.A.S. De S. Rajakaruna clarified that the Government’s decision to revise profit margins was based on actual costs, not on sales prices. He further explained that the ongoing issue had been sparked by one group of distributors who had publicly announced their refusal to purchase fuel, which he said misrepresented the situation.

“The situation is different from what was portrayed,” Rajakaruna said, noting that the CPC had 1,696 orders, LIOC 471, Sinopec 391, and RM Parks 366, totalling 2,924 fuel orders. He assured that distribution was ongoing as usual.

Rajakaruna also stressed that the new pricing formula was designed to protect distributors and prevent unfair profits at the expense of consumers. “We consider distributors as part of the fuel network,” he added.

Minister of Labour and Deputy Minister of Economic Development Prof. Anil Jayantha Fernando echoed these reassurances in Parliament yesterday (1), stating that there was no fuel shortage in the country. He accused organised groups of attempting to create an artificial fuel crisis to exaggerate the situation.

The Ministry of Energy has backed the CPC’s decision to revise commission rates, rejecting calls for negotiations with the Petroleum Dealers’ Association. 

Ministry of Energy Secretary Prof. Udayanga Hemapala explained that the dealers’ demands for higher profits were unreasonable, as commissions should not fluctuate with fuel prices.

“Previously, the dealer margin was around 2.5%, which was later increased to 3% when fuel prices were lower. Now that prices have doubled, continuing to calculate commissions as a percentage would result in excessive profits for dealers to the detriment of consumers,” he said.

Despite concerns over fuel shortages due to the Petroleum Dealers’ Association’s threat to halt new fuel orders, Hemapala reassured the public that there was no crisis. 

“Fuel remains available in the country and any issues are related to distribution, not supply,” he explained. Even if private dealers refuse to place new orders, CPC-owned stations and Lanka IOC outlets will continue operations.

Hemapala stated that the situation primarily affected privately owned stations but noted that it was not a significant concern, as the situation could be managed without them.

In response to reports of long queues in Colombo, he attributed this to public panic rather than an actual shortage. He expressed confidence that the dealers would understand the rationale behind the Government’s decision and ultimately comply.