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Sri Lanka's richest 10-pct consume 31-pct of fuel

May 12, 2018 14:07 PM GMT+0530 | 0 Comment(s)

CONSUMPTION:  A bullock cart transporting kerosene in a street in Sri Lanka among SUVs and three wheelers.

ECONOMYNEXT - Sri Lanka's richest 10 percent of households consume 31 percent of the fuel used in the country, based on the latest household income data, Finance Minister Mangala Samaraweera said.

Samaraweera said the government would pay a subsidy to poor households in the Samurdhi income support scheme who used kerosene for lighting.

Sri Lanka hiked petrol by 17 percent to 137 rupees a litre and diesel by 14.7 percent to 109 rupees a litre as global prices rose and the rupee collapsed to 155 from 131 to the US dollars due to money printing and real effective exchange rate index targeting.

Kerosene was raised from 44 rupees to 101 rupees a litre. Sri Lanka raised kerosene prices during the Rajapaksa administration after finding out that most of it was used by big factories owned by multimillionaires but the new administration slashed the price, raising concerns over corruption.

Samaraweera said a cash grant would also be given to small boat owners who used kerosene.

Small fishing boats that used kerosene would also get a subsidy. A cash grant would be sent to their bank accounts from the first of June, Samaraweera said.

According to finance ministry calculations based on Sri Lanka's 2016 Household Income and Expenditure Survey the richest 20 percent of society consumed 47 percent of the fuel and the richest 30 percent consumed 60 percent of the fuel.

The poorest 10 percent of households consumed only 2 percent of the fuel sold, the next 10 percent, 3 percent showing that the poorest 20 percent of society consumed only 5 percent of the fuel.

The poorest 30 percent of households consumed only 10 percent of the fuel.

The trend holds the world over, as energy use goes up with incomes. Within countries also richer nations use more energy per person than less affluent ones.

The rich use cars, travel more and in the case of electricity also they have bigger houses and may use air conditioning or washing machines.

As a result, energy taxes are progressive and should delight leftists in particular. Even those operating in a black economic pay taxes when they travel, which is the beauty of indirect taxes, unlike in the case of direct taxes like income tax which are avoided, analysts say.

On the other hand, food taxes, especially import duties on basic foods, imposed to give extra profits to the farming lobby are regressive and hurts the poor the most. (Colombo/May12/2018 - Update II)