Fuel price fund fate to be decided tomorrow

  • Gammanpila expects Cabinet to announce its stance
  • Requests capital from Treasury to establish fund
  • Says will hike fuel prices if no assistance from Treasury

BY Yakuta Dawood

As global oil prices continue to soar, the Ministry of Energy awaits final word from the Cabinet of Ministers on the re-establishment of the Fuel Price Stabilisation Fund, which is expected to be given tomorrow (18) during the cabinet meeting, The Sunday Morning Business learns.

When contacted, Ministry of Energy Secretary K.D.R. Olga said that despite the uncertainty in global fuel prices, the Fuel Price Stabilisation Fund can still be re-established to protect local suppliers if an amount was granted by the Ministry of Finance.

“We have not requested an exact amount, but we asked the Treasury to provide capital to initiate the Fuel Price Stabilisation Fund during these uncertain times. Hence, whatever grant allocated by them will be entertained, as the decision will also depend on the liquidity position of the Treasury,” Olga explained.

Speaking to us, Minister of Energy Udaya Gammanpila stated that the final decision on re-establishing the Fuel Price Stabilisation Fund will be announced by the Cabinet of Ministers tomorrow.

Meanwhile, addressing another issue, Gammanpila told us that if the Treasury was unable to provide a proper mechanism to cover the losses of the Ceylon Petroleum Corporation (CPC), the institute would be forced to increase the fuel prices on their own to offset current challenges.

“We are losing Rs. 31 per litre of diesel and Rs. 15 per litre of petrol. As of September 2021, the CPC incurred a cumulative loss of Rs. 83 billion. There is no institute in Sri Lanka, or in the entire history of Sri Lanka, that recorded such a colossal loss,” Gammanpila said.

Adding to this, Olga also stated that the Ministry, on behalf of the CPC and Lanka Indian Oil Corporation (Lanka IOC) PLC, wrote to the Ministry of Finance, requesting that they be granted some concession for the importation of fuel, noting that fuel prices would inevitably increase in the event such a concession was not granted.

“The CPC and Lanka IOC have made requests to increase fuel prices. Therefore, considering these requests, we have asked the Finance Ministry to provide some relief to these two companies to supply fuel at the existing prices,” Olga said.

However, when inquired as to whether there was any response to their request, Olga added that no such response was received so far. She added that she learnt that the Ministry of Finance was discussing the matter.

Currently, the CPC is suffering significant losses, as the global per barrel cost of oil is above $‌ ‌80‌ in comparison to $‌ ‌70, which was when local oil prices were last revised.

“Sri Lanka is facing a twofold burden: One due to surging global oil prices and the other due to the rupee depreciation. Therefore, discussions have begun with the Ministry of Finance to find an appropriate mechanism to resolve the issue. Perhaps the prices could be revised again, but the decision is not yet finalised,” Olga explained last week.

According to her, the CPC was incurring a loss of Rs. 20 per litre on products such as Lanka auto diesel and Lanka super diesel.

After maintaining local fuel prices for 21 months, the Government revised the prices in June this year. Accordingly, the price of a litre of 92 octane petrol was increased by Rs. 20 to Rs. 157, 95 octane Euro by Rs. 23 to Rs. 184, diesel by Rs. 12 to Rs. 111, super diesel by Rs. 12 to Rs. 144, and kerosene by Rs. 7 to Rs. 77.

Attempts to contact the Ministry of Finance and Treasury Secretary S.R. Attygalle proved futile.