Sri Lankans have learnt, at some cost, that a war fought thousands of miles away can empty a household purse on our shores. The Cabinet is to consider a Rs 41 billion fuel subsidy meant to shield consumers over the next three months from the latest surge in global petroleum prices. The instinct behind it is understandable. Whether it is sustainable is a harder question, and the public deserves an honest answer to it.
The numbers explain the anxiety. Since February, the international price of diesel has risen by 92 per cent, petrol by 78 per cent and Murban crude by 66 per cent. Domestic prices have climbed far less, with petrol 36.2 per cent and diesel 35.9 per cent above February levels. That gap is the subsidy in practice: the State is absorbing what the pump price does not reflect. It is a kindness to the consumer, but the bill lands somewhere, and it lands on the Treasury.
The Treasury has been here before. Rs 57 billion was spent between April and June, when diesel carried a relief of Rs 100 a litre and petrol Rs 20. When global prices eased, the Government passed the savings to the public, cutting diesel by Rs 25 a litre in July without any subsidy and trimming petrol in July and August. That was sound practice. Together with the new outlay, however, relief will have cost close to Rs 98 billion in a single year, for a country still rebuilding its finances after the 2022 collapse.
Nor is there any sign that the storm is passing. Brent is above $105 a barrel. President Trump has rejected Iran's latest peace proposal, though he has hinted at more talks this week. The Houthis and Iran continue to strike at Saudi Arabia, and diesel prices in the United States have reached record levels, with talk of export curbs that would squeeze supply elsewhere. The one glimmer is that Middle East crude exports recovered in September to 12.8 million barrels a day, the highest since the war began in February.
What does this mean for the ordinary Sri Lankan? Fuel is not merely a line on a household budget. It is the hidden cost in almost everything. Diesel moves the bus, the lorry, the fishing boat, the tractor and the generator. When it rises, the fare, the price of vegetables and the cost of a packet of rice follow. Inflation, which the Central Bank has worked hard to tame, could return through the back door. A larger oil import bill while dollars remain scarce also pressures reserves and the rupee, and a weaker rupee makes every imported item dearer still.
The dilemma for the President, who also holds the Finance portfolio, is plain. Withdraw support and risk hardship and unrest among those who cannot absorb another shock. Extend it indefinitely and risk fiscal slippage, and the commitments made to the International Monetary Fund and creditors, whose patience the country cannot afford to test. A subsidy that is not funded honestly is only a deferred tax or deferred inflation.
Several things should therefore accompany today's decision. First, the subsidy must be time bound, with a clear end date and a plan for the day it lapses, not a slow drift into another open-ended commitment. Second, the Government should explain where the Rs 41 billion is coming from, whether reallocation, revenue or borrowing, so that the public is not surprised later. Third, the Ceylon Petroleum Corporation must publish its pricing formula and be open about its losses. Fourth, relief should reach those most exposed, including public transport, farmers, fishermen and low-income families, rather than the well-off who fill large vehicles.
Beyond this quarter lies the deeper task. The country buys too much of its energy abroad, and each Middle East flare up exposes that. Investment in renewable power, a serious push for public transport, fuel efficiency and reliable electric mobility are not fashionable slogans. They are insurance. Every crisis that passes without reform only guarantees the next one.
The Government deserves credit for acting before the pain deepened, and for being willing to pass falling prices to consumers when it could. Still, subsidies are a bridge, not a destination. Sri Lankans, who have queued for fuel and endured hardship, will accept difficult truths if they are told plainly. The next three months should be used to prepare for the world as it is, not as we hope it will be.