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Sri Lanka fuel consumption rises sharply after price cuts

May 12, 2015 07:09 AM GMT+0530 | 1 Comment(s)

COLOMBO (EconomyNext) – Sri Lanka’s fuel sales have been rising steadily this year since the new administration slashed prices soon after coming to power in January 2015, officials said.

The growing consumption is driven both by the price cuts and increasing imports of vehicles.

The sharpest increases were seen in premium 95 octane petrol and ‘Lanka Super Diesel’ during the January – April 2015 period, Suren Batagoda, secretary to the Ministry of Power and Energy, told EconomyNext.com.

Sales of standard 92 octane petrol went up 18.3 percent or 438,240 litres to 2,837,890 litres in April 2015 from 2,399,650 litres the year before.

In April 2015 auto diesel sales rose by 241,670 litres or 6.5 percent to 3.97 million litres from a year ago.

Sales of kerosene rose by 10.8 percent to 414,590 litres in April 2015 from the same month in 2014, CPC statistics showed.

In premium fuel grades, which are used by newer vehicles, sharp increases were seen, though overall volumes were low compared to standard grades.

According to CPC statistics, sales of ‘Lanka Super Diesel’ rose 48 percent to 143,000 litres in April 2015 compared with the same month in 2014 while sales of 95 octane petrol rose 51 percent to 269,060 litres over the same period.

Though rising fuel use is a chance to boost tax revenues to finance higher state salaries, the sector is in crisis with Ceylon Petroleum Corporation making a 4.0 billion rupees loss in the first quarter due bad pricing, which is unable to recover costs and direct taxes.

In the past few weeks, crude prices have risen sharply, making prices go up automatically in free countries with stable economies.

Even in countries like India and Vietnam where markets are distorted by the state like in Sri Lanka and economies are less stable, prices have been raised in the last month.

The fuel price cuts in Sri Lanka gave a strong boost to the economy with overall consumption increasing by about 30 percent in the first quarter, Minister of Power and Energy Patali Champika Ranawaka said.

The consumption boom fired by the new administration through fuel price cuts and a state salary hikes, which is financed by domestic credit, is placing unsustainable demand pressure on the balance of payments, analysts have warned.

The state-owned oil refiner, Ceylon Petroleum Corporation (CPC), had to forgo revenue of about 80 billion rupees in the first three months owing to the price reduction, he told a news conference, giving an indication of the demand pressure unleashed by the state on the economy.

The Central Bank has also cut policy rates on top of the consumption boom.

 


 

1 Comments

  1. Mevan May 12, 10:32 AM

    These are sadly short-sighted, knee-jerk vote grabbing ideas of Champaka. As a result the pollution has increased and the traffic jams are causing chaos. Soon we will be like Delhi with reduced life expectancy due to pollution

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