No objections to go back to fuel formula
- Attygalle says will implement if Govt. approves
- So far no discussions held on formula
- Central Bank, Justice Min. call for formula
By Yakuta Dawood
Amidst calls to implement a fuel pricing formula, the Ministry of Finance has no objection to reverting to a pricing mechanism for fuel, should the Government grant its approval, The Sunday Morning Business learns.
Speaking to us, Treasury Secretary S.R. Attygalle stated that the Ministry would proceed with implementing a pricing formula to curtail the ongoing issue if the Government granted approval. However, according to him, there have been no official discussions held in this regard.
“This is a decision that has to be taken by the Government; if they do, we will implement. But, as of now, no discussions have been held,” Attygalle said.
Nonetheless, he refused to divulge information on the Fuel Price Stabilisation Fund.
However, Minister of Energy Udaya Gammanpila, speaking to us last week, stated that a fuel stabilisation fund is more appropriate for a country like Sri Lanka, and would be a suitable alternative for the Ceylon Petroleum Corporation (CPC) to follow, rather than a pricing formula for fuel.
“The Central Bank can only make recommendations and reports; the ultimate decision is with the Government. I have proposed the Fuel Price Stabilisation Fund from last year, as it is more suitable for a country like Sri Lanka. As of now, we have not taken any decision, but the final decision will be decided by the Cabinet,” Gammanpila said last week.
Furthermore, a senior CPC official told us, on condition of anonymity, that they had no objection to following the fuel pricing formula if the Government decided to implement it in the future.
“We are already in line with a similar price formula with a cost-based price mechanism. Therefore, we have no objection to implementing it. However, the decision is up to the Treasury,” the official added.
Likewise, Minister of Justice Ali Sabry PC, speaking in Parliament last Tuesday (16) during the debate on the second reading of the Budget, claimed that he agreed with the recent proposal put forward by the Central Bank of Sri Lanka (CBSL) to reintroduce a fuel pricing formula, and requested Finance Minister Basil Rajapaksa and the Government to consider the proposal.
Explaining further, Sabry claimed that he believed Sri Lanka must once again implement a system that allowed 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,” Sabry had added.
The CBSL, in its “Recent Economic Developments” report, highlighted that a suitable cost-reflective pricing mechanism was essential for the financial viability of the CPC, and thereby for the stability of the banking sector. This, in turn, could improve transparency and improve the general public’s acceptance of much-needed regular price revisions in relation to these imported products.
“Needless to say, a predetermined formula can also pave the way for a quick pass-through of the benefits of any price declines in global markets,” the CBSL mentioned in its report.
Furthermore, the CBSL 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”.
According to the CBSL report, increased global demand and supply conditions led to the increase of global crude oil prices. Consequently, the average Brent prices increased to $ 67.8 per barrel during the nine months ending September, which represents a 58.3% year-on-year (YoY) increase compared to the corresponding period in 2020.
After maintaining local fuel prices for 21 months, the Government revised the CPC 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 petrol 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.