News

Energy Ministry split on new Fuel Fund

  • Cabinet approval pending for Gammanpila’s proposal

  • ‘Fund not possible amidst world price rise’: Energy Secretary 

By Buddhika Samaraweera

 

Although Energy Minister and Cabinet Co-Spokesman Udaya Gammanpila has submitted a proposal to Cabinet to re-establish a Fuel Price Stabilisation Fund, there is some uncertainty regarding such action due to the rising prices of petroleum in the world market, The Morning learnt.

High level sources at the Energy Ministry recently told The Morning last week that the previous Fuel Price Stabilisation Fund, which was set up in 2020 to absorb shocks in global price fluctuations without changing local oil prices, which at the time had between Rs. 18-20 billion in its coffers – but has no money at present. Against this backdrop, Gammanpila had submitted a Cabinet paper last April to re-establish the Fund, for which Cabinet approval is yet to be granted.

When contacted by The Morning yesterday (23), Energy Ministry Secretary D.R. Olga noted that such a fund could usually be set up only when the prices of oil in the world market falls, and that it is not possible to set up such a fund at the present time, as global oil prices are rising.

According to sources, the Fund was used to settle a loan that the Ceylon Electricity Board (CEB) had to pay off to the Ceylon Petroleum Corporation (CPC). Thereafter, the relevant amount had been used by the CPC to settle a loan due to Bank of Ceylon (BoC) and People’s Bank. Due to this, the expected objectives of setting up the Fund could not be achieved, Ministry sources had said.

Trade Minister Dr. Bandula Gunawardana, addressing a Cabinet media briefing in March 2020, had said that the Government has made a policy decision to not revise fuel prices for a period of a year, irrespective of the price fluctuations in the world market. He also said that the said Fund would be set up to absorb both profits and losses by maintaining fuel prices unchanged.

The Cabinet paper that had been presented when initially establishing the said Fund stated that Rs. 50 billion would be provided to the CEB from the aforementioned Fund, and that the CPC would supply crude oil to the CEB at a rate of Rs. 70 per litre. Dr. Gunawardana also observed that the CPC’s debt stood at Rs. 600 billion in 2019, while it had also recorded an operational loss of Rs. 106 billion in 2018, and Rs. 12 billion in 2019.

“Many countries tend to look for mid-term local solutions, considering the risk prevailing in economies due to the slowdown experienced in the global economy. Accordingly, the Government, taking the experts’ opinions into consideration, has paid attention to obtaining the benefits of the current declining trend in crude oil prices in the global market,” the Cabinet paper in that regard read.

However, amidst controversy over the Government’s decision to increase fuel prices, Dr. Gunawardana recently told The Morning that the said Fund may have “evaporated” by now.