ECONOMYNEXT – Sri Lanka’s fuel subsidy allocation of Rs. 57 billion will end by June, which was the reason for raising oil prices over the weekend, Ceylon Petroleum Corporation (CPC) Chairman D J A S De S Rajakaruna said.
Despite the latest increase, he said prices are still below the real cost, which the International Monetary Fund (IMF) has accommodated for the time being.
“Actually, for the sake of the people, the government is still bearing 100 rupees for every litre of diesel you buy,” Rajakaruna told reporters on Monday.
“We bore that loss in past April, we bore it this month in May, and in the upcoming month of June, we will continue to bear 100 rupees per litre. For a liter of petrol, we are bearing 20 rupees per litre.”
“The government has allocated 57 billion rupees for this purpose, and the amount allocated will end with this month of June.”
“That is why….the government decided to increase fuel prices to a certain extent, while trying not to impact the economy severely.”
The IMF in its Staff Report on Sri Lanka last week said the adherence to cost-recovery energy pricing is a critical pillar of the program.
It said the cost-recovery pricing has not been met since April as increases only partially reflected the higher costs following the Middle East conflict.
“ Authorities will compensate CPC for past losses through an explicit on-budget transfer and published a cabinet decision ensuring fuel subsidies are on budget, limited, and fully phased out by end-September 2026,” it said in its report.
It also said the cost-recovery pricing on electricity also has not been met since January as the tariff was not revisited despite higher costs.
“The 10.9 percent average increase for Q2 approved on March 31 does not fully incorporate higher fuel prices and the expected change in the composition of energy generation. To restore cost recovery, a new tariff revision reflecting these factors will be issued by the regulator,” the IMF said.
The CPC spent more than US$ 520 million in May for fuel import due to high global oil prices and increased import volumes, from US$ 100-120 million a month before the Middle Eastern conflict, Rajakaruna said.
“If this goes any further, it will impact the people, which is why we constantly tell you to reduce fuel consumption as much as possible,” he said.
If things continue like this and impact the dollar value, it will hit back, not just on fuel prices, but it will affect everything else too. Therefore, if we do not manage this as a country, the impact on the entire economy will be far more severe.
He said the CPC is incurring a loss of Rs. 129 from every litre of diesel and Rs. 60 from petrol.
Out of these losses, the government bears Rs. 20 rupees per litre of petrol and Rs. 100 rupees for diesel.
“This is the actual situation behind why fuel prices have increased. That is why we continuously ask the public to reduce fuel usage as much as possible.” (Colombo/June 01/2026)