ECONOMYNEXT – Sri Lanka’s central bank has called for a price formula for petroleum which are now under price controls administered by the Finance Ministry amid as the US Federal Reserve prints money firing a commodity bubble while domestic money printing weakens the rupee.
Sri Lanka’s Finance Ministry gave the go ahead for state-run Ceylon Petroleum Corporation to raise prices on June 12.
“However, the recent rising trend of global prices of crude oil and forecasts that this trend is likely to continue during the remainder of the year highlight that this revision is likely to be inadequate in the period ahead,” the central bank said in an update on recent economic developments ahead of the budget on November 12.
“A suitable cost-reflective pricing mechanism is essential for the financial viability of the CPC and thereby the stability of the banking sector.
“Such a mechanism can also improve transparency and thereby improve the general public’s acceptance of much needed regular price revisions in relation to these imported products.
“Needless to say, a pre-determined formula can also pave the way for a quick pass-through of the benefits of any price declines in global markets.”
The ruling Sri Lanka Podujana Peramuna came to power in 2019 promising an end to formula based pricing.
However the central bank has been encouraging formula based pricing for many years to multiple administrations.
Petroleum Minister Udaya Gammanpila says the decision to raise prices rests with the Minister of Finance, but CPC is now making large losses. (Colombo/Nov12/2021)