Sri Lanka not planning to hike fuel prices; state airlines in arrears: energy ministry

COLOMBO (EconomyNext) – Sri Lanka is not planning to raise fuel prices, despite an uptick in crude, and state airlines and other agencies are also 20 billion rupees in arrears to Ceylon Petroleum Corporation, the energy ministry said.

Sri Lanka does not have an automatic price formula, or a free market in fuel and pricing continues to be driven by political and state intervention generating balance of payments crises.

In the last few days both India and Vietnam, where there is state intervention prices, raised prices. Vietnam raised petrol prices by about 1950 dong a litre. India raised diesel by 2.37 rupees and petrol by 3.96 rupees a litre, reversing price cuts in April.

Sri Lanka’s energy ministry however denied it is planning to raise oil prices.

Instead of giving a 40 billion rupee reduction in oil prices as promised by an election manifesto, an 80 billion rupee reduction had been given, the energy ministry said.

When prices are cut, any benefit to the balance of payments from falling oil prices disappears.

When cost rise, by keeping pump prices down, and funding losses after tax with credit, a state petroleum firm can increase the spending power of consumers and push up non-oil imports, putting pressure on the currency.

In all countries retail fuel such as petrol and diesel is heavily taxed to finance road building and maintenance and also because higher levels of energy is consumed by richer sections of society and it is consider fairer to tax energy than food.

 

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