Thursday June 27, 2019

Sri Lanka fuel subsidies consumed by the richest 30-pct

Nov 02, 2017 14:55 PM GMT+0530 | 5 Comment(s)

ECONOMYNEXT - Sri Lanka's top 30 percent of society consumed and overwhelming 70 percent of fuel sold in the country and subsidies are effectively channelled to the rich, World Bank country economist Ralph van Doorn said.

Pricing reforms were required to fix state enterprises, which have now become fiscal risks, van Doorn said.

"Since the non-poor are the largest consumers of fuel and electricity the administered fuel prices are an effective subsidy to the non-poor funded indirectly by fiscal resources," World Bank's Sri Lanka Development Update for 2017 said.

The share was much higher than the consumption of fuel by the bottom 40 percent of earners directly and indirectly through public transport, the report said.

In all countries most of the income of the poor go to food, and energy consumption goes up with income as they travel more and use powered equipment and air conditioning.

In Sri Lanka electricity is price discriminated with large households paying more than small users. But fuel prices are indiscriminate.

In Sri Lanka kerosene is also subsidized and is use by several industries. The current administration sharply cut kerosene tariffs, giving rise to concerns of cronyism.

When global fuel prices go up, subsidies are financed through state bank credit. High levels of debt at state enterprises taken to finance consumption subsidies have added to Sri Lanka's debt crisis.

On several occasions money printed to finance energy subsidies has triggered balance of payments crises. In 2003/4 money was printed to replace tax offsets given to Ceylon Petroleum Corporation.

In 2011/2012 money was printed to keep rates down as energy utilities borrowed heavily from state banks. (Colombo/Nov03/2017)



  1. engMVRPerera November 03, 02:53 AM

    when our President has from the time he came to power has avoided the cheapest source of electricity coal fueled BOT projects and gone for very expensive solar wind ect which has given us the people one of the highest cost electricity in the world as such no investors will come to our country

  2. sacre blieu November 03, 08:52 AM

    LIOC are reporting big losses at the current price at the pumps and have sought a price increase. The CPC is reported to have made a profit. What the the accumulated loss of the CPC. With the rise in petroleum prices how would they maintain current price levels, and more so, when elections are round the corner. Does the government have to continually absorb such debt, where finally the public are taxed.

  3. sacre blieu November 03, 07:44 AM

    In our political history, most governments use cunning to deceive the masses, finally to the advantage of a few. This appears to be the main cause of the huge debt and the bottom half are made the victims. Those who are revelling in luxury, as a result, should be made to pay more taxes. The distribution of wealth has never been equitable.

  4. NAK November 03, 06:49 AM

    This is top grade cockeyed advice. Recently there was a news item saying that the government is contemplating a reduction of oil prices as they have made a massive 9000 mn profit last year.

  5. Hybrid November 02, 06:00 AM

    The World Bank does not have to teach us this, its well known by our Lord Byrons.So the point is this: They officers making these policy decisions are the beneficiaries as well as the benefactors. In the commercial scenario it is called Confkict of interestSo give the policy decisions making to independent and multiple compettant parties who cannot benefit themselves or their political parties or social groups.

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