Pricing formula sends fuel prices through the roof

By Rathindra Kuruwita

The Cabinet had introduced a fuel pricing formula, Minister of Power and Energy, Kanchana Wijesekera said, addressing the post-Cabinet Press Conference.

Wijesekera said the need for a fuel pricing formula had arisen due to the current crisis.

“When the previous government introduced a fuel formula, we were in the opposition, and we were critical of it. However, a pricing formula is a must,” he said.

With the implementation of the fuel pricing formula, the price of fuel would be changed once in two weeks or once a month, depending on the requirements, the Minister said.

Minister Wijesekera said that Sri Lanka needed about USD 530 million to import fuel for the month of June.

“However, in recent times we have only collected about Rs. 75 billion Sri Lankan rupees a month. There is a gap of 125 billion rupees. To bridge the gap, we must go to the Central Bank or to the Finance Ministry. They will have to print money to help us. So, they have asked us to cover our costs,” the minister said.

He said that the cost of importing and distributing a litre of 92 octane petrol was Rs. 421.71 and that at the previous price of Rs. 338, the Ceylon Petroleum Corporation (CPC) was making a loss of Rs. 83.71 on each litre.

“We increased prices by Rs. 82. Even with this we incur a loss of over a rupee,” the Minister said.

They had been selling a litre of 95 octane petrol at Rs. 373 when the cost of importing and distributing a litre was Rs. 444. “We have increased the price to Rs. 450 now,” he said.

The Minister said the cost of importing and distributing a litre of auto diesel was Rs. 400.60 and the price had been increased to Rs 400. The cost of a litre of super diesel was Rs. 444.94. With the increase of Rs. 116 a litre, the new price was Rs. 450.

“However, we still sell kerosene at Rs. 87 a litre. The cost is Rs. 362.26, which means we make a loss of Rs. 275.26 per kerosene litre sold. We also asked for a hike in kerosene, but the President, the Prime Minister and some other Ministers said that kerosene was used by several vulnerable groups and that we must not increase prices now,” he said.

However, there was a lot of misuse involving kerosene, especially in the transport sector, the Minister said. A significant number of buses were now run on kerosene although they increased bus fares when diesel prices went up.

“We have asked the Transport Minister to check the emission certificate of these buses and identify whether they have been using kerosene. People ask us how the Lanka Indian Oil Corporation (LIOC) makes profits when the CPC makes losses. It is mainly because we sell kerosene, the IOC doesn’t sell kerosene. We also help government institutions like the Ceylon Electricity Board (CEB), railways, Sri Lanka Transport Board (SLTB) and SriLankan Airlines. And there are many delays in payments. For example SriLankan Airlines alone owes us over 300 million US dollars,” he said.

The Minister said that they had spoken to private bus and bowser associations and asked them to increase fares, based on pricing formulas. Gas stations too had been informed that their credit limit had been increased, he said.

“We have also asked gas stations to increase the limit of fuel allocated for vehicles. Now, gas stations can pump fuel worth Rs. 2,500 to motorcycles, Rs. 3,000 to three-wheelers and Rs. 10,000 to other light vehicles. We will have to enforce these limits for a few more days. We also urge people not to hoard fuel because this will prolong the crisis,” he said.

The Minister added that the police have been raiding places that have been hoarding fuel and selling at higher rates. All gas stations now have security force personnel in civvies and in uniform to ensure the safety of the institution and employees, he added.

“We are also monitoring people who are joining queues, filling up and then taking the fuel out to sell at the black-market. This is especially happening at the IOC gas station in Narahenpita. We are monitoring this situation and soon severe action will be taken against such people,” he said.