Tuesday June 18, 2019

Sri Lanka to go ahead with price formula; ad hoc policy may end

Jul 10, 2018 20:04 PM GMT+0530 | 7 Comment(s)

ECONOMYNEXT - Sri Lanka is set to implement a fuel price hike by formula, which was reportedly scuttled by President Maithripala Sirisena last week, in a development that can help improve long term economic and currency stability, a minister has said.

Finance Minister Mangala Samaraweera implemented the price formula after detailed discussions and gaining cabinet approval and not through an arbitrary policy.

Market pricing fuel is a policy advancement called by many independent economists and analysts every since Wimal Weerawansa opposed, an opposition legislator opposed it.

The public was informed by the finance ministry that a price change will happen on the fifth of the month.

However the price increase was arbitrarily scuttled in a Trump-style allegedly executive order, literally on the eve it was set to take place creating confusion at petrol sheds.

"Glad that President @MaithripalaS has appreciated the need to continue the fuel price formula," Deputy Economic Policy Minister Harsha de Silva said in a twitter.com post.

"Positive development for #SriLanka. Will certainly help in managing macro variables plus demand side management."

When petroleum utilities run losses and finance them with bank debt, or taxes are removed to keep prices down and the government is forced to borrow, interest rates go up and investible savings are used for political gain and consumption.

Any attempt by the central bank to keep rates down, by printing money then result in currency depreciation and inflation.

However under current so called REER-targeting or trade-oriented monetary policy practised over the past two years, the currency may fall even if people pay taxes.

Sri Lanka's finance ministry sources said last week the plan was to change prices more often, which could be weekly or every two weeks. In most free countries with low inflation, fuel prices change daily.

"There is no need for politicians to sit in Committee to decide prices," de Silva said.

"There is a formula and that should determine the price. Not everything has to be politicized. That IS the problem in this country. More frequent the adjustment better it is."

More frequent adjustments may also mean smaller changes. It is not clear what the new prices would be. But if prices are changed weekly, or monthly changes have to be small. (Colombo/July10/2018)



  1. Leonard July 11, 06:55 AM

    What crises what happen to the mega oil fields that opened under Rajapaksa times?

  2. Nirmal July 11, 06:32 AM

    Hello formula, It is because we import oil that prices must be raised. Cost of other goods will rise if the rupee falls due to money printing, not because oil rises. Even oil producers that do not sell at market prices have high inflation. Venezuela is a case in point so is Iran. Oil is dirt cheap in both countries and prices are rising. Oil is the most dangerous item to subsidize.Problem is Ravi Karunayake and President and Arjuna Ranatunga thought like you and everyone is paying the price.

  3. Formula July 11, 06:22 AM

    This is not suitable for our country. Fuel formula is good for the countries which produce fuel. When you change the price of fuel every month, will the price of other goods change? No. Stupid pointless policies of IMF backed yahapalanaya.

  4. Kevin July 10, 10:23 AM

    Anyhow, Sri Lanka can definitely afford to subsidise the rich OPEC countries by buying oil from them at world market prices and then re-distributing it below world market prices and covering the loss by more taxes.
    It is amazing that Sri Lankans and this President can believe we can have petrol or diesel at below world market. The country/government has to buy oil internationally at World Market Prices. We pay the oil producing countries (usually in the Middle East) the 100 per barrel but then sell it locally for 60.
    The shortfall (subsidy) of 40 has to come from all taxpayers in Sri Lanka, including villagers who do not use petrol or diesel. Every time a villager buys a cup of tea or a packet of sugar in the boutique he has to pay the VAT (tax).
    So the villager and every tax payer in Sri Lanka is subsidising the rich Middle East oil producers. Idiotic and absurd. No point in being a President if you cannot figure that simple Grade 8 arithmetic.

  5. Nana July 10, 09:07 AM

    Why need a committee to calculate a simple arithmetic ? Once Fuel price formula (This includes a profit margin as well) is in place CPC should make bigger profits than LIOC, as their many resources are financed by Govt free.

  6. Raji July 10, 08:47 AM

    Long awaited good move. Why subsidise Petrol prices for people to go to work in their vehicles. Vehicle owners should bear the actual cost of fuel, used by them for their vehicles. If the fuel prices are too high, then they should leave their vehicles at home and use public transport modes instead.

  7. Tilak July 10, 08:22 AM

    As long as all dirt is washed on people's heador okkoma kunu beruwala bokkata with formula perception , or trend, or habit is firmly routed out by authorities with proper systems,rules, culture,audit supervision, whilst implementing the formula this is the best course. Otherwise not.In this democratic country activists do have a role to play.

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