ECONOMYNEXT – Sri Lanka’s state-owned Ceylon Petroleum Corporation (Ceypetco) raised petrol to 338 rupees a litre and auto diesel to 289 rupees from the mid night of Monday after saying it suffered big losses due to a collapse of the rupee and higher global prices.
It also removed a fuel rationing introduced last week to limit sales to individual customers at pump to stop sheds from running out of fuel faster.
The latest price hike will see the price of mostly used Octane 92 rising by 33.1 percent to a record 338 rupees a litre while auto diesel jumping by 64.2 percent to 289 rupees, in par with the prices of Lanka IOC, the Indian Oil Corporation unit .
Octance 95 will go up to 373 rupees, higher than the 367 rupees at LIOC. Octane 95 fuel is usually sold at a profit. Super diesel, which is also usually profitable was raised to 329, higher than LIOCs 327 rupees.
Since the central bank on March 7 announced a flexible exchange rate, the rupee has fallen nearly 70 percent to around 340 rupees. The Lanka IOC raised prices thrice since the central bank’s decision to allow flexible exchange rate, though the Ceypetco has increased only once.
The move came after thousands of motorists turned to Ceypetco as Lanka IOC prices were expensive. Some Ceypetco filling stations ran out of fuel, as a result.
Ceypetco chairman Sumith Wijesinghe on April 11 said the state-owned fuel retailer was losing between 800 to 1000 billion rupees a day as it was losing 110 rupees per litre of diesel when it was sold at 176 rupees and 52 rupees for a litre of petrol when it was priced at 254 rupees.
The Lanka IOC has been raising fuel prices in line with the global market price, but Ceypetco, under pressure from the government, was not allowed to raise prices because such move would be make the ruling Sri Lanka Podujana Peramuna (SLPP) unpopular.
Sri Lanka is facing its worst economic crisis since the independence from the British colonial rulers in 1948. The island nation last week announced a “preemptive default” on its sovereign debts.
The government is facing strong protests from both public and opposition parties for mismanagement of economic policies. A youth-led protesters have spearheaded a campaign, demanding President Gotabaya Rajapaksa and his government to resign due to their failure.
A severe shortage of fuel was seen in the last few weeks because the Ceypetco also has to supply for power generation amid extended power cuts as high as 13 hours in some days.
When prices are not raised and losses are financed with bank credit, which in turn is re-financed by the central bank through its 13.5 percent window, inflation goes up. The money printed to finance losses also creates forex shortages.
The dollar shortage has led to a lack of fuel and extended power cuts, crippling many industries related to manufacturing and transport, and disrupting the country’s economic activities. (Colombo/April 19/2022)