COLOMBO (EconomyNext) – Sri Lanka’s state-owned oil refiner, Ceylon Petroleum Corporation (CPC) made a four-billion rupee loss in the first three months of 2015 even though earnings before excise duties were paid amounted to 17 billion rupees, officials said.
Minister of Power and Energy Patali Champika Ranawaka said the sharp cut in fuel prices soon after the new government was formed in January had helped reduce costs for both business and the public.
“The fuel price reduction stimulated the whole economy,” he told a news conference. “It made the entire economy and especially exporters more competitive in international markets.”
“The CPC, in the past three months from January 1 to March 31, has a surplus of about 17 billion rupees,” he said. “We are determined not to have losses anymore.”
The surplus was before excise duties were paid. The CPC has been incurring losses over the years because politicians did not allow it to raise prices to match imported costs and excise taxes in a deceptive game, critics say.
Suren Batagoda, secretary to the Ministry of Power and Energy, told EconomyNext.com that the CPC’s loss after taxes were paid was four billion rupees in the first quarter.
“The CPC does generate a surplus but diverts it to the people by way of taxes or prices.”
Ranawaka said the CPC made losses in the past partly because of government policy to subsidise fuel retail prices and that government agencies including the national carrier Sri Lankan Airlines and its budget carrier Mihin owed the CPC 20 billion rupees.
Ranawaka said the January retail fuel price reduction was the equivalent of an 80 billion rupees fuel subsidy given to the people in the three months from January to March.
“Each family gets to save about 15,000 rupees on lower fuel prices to increase their consumption.”
Ranawaka said the CPC’s capital expenditure had already been reduced drastically and that he would ensure it remained free of corruption.
“We’re going to introduce open competitive bidding for oil procurement and use local expertise to refurbish and revamp our pipeline network and wherever possible to do engineering work.”
Ranawaka said they would not raise retail prices of fuel despite the recovery of international oil prices and that in future pricing would be done according to a pricing formula based on fluctuations in global prices.