Sri Lanka says to remove fuel subsidies
COLOMBO, Dec 07, 2014 (EconomyNext) – Sri Lanka has announced its intention to remove fuel subsidies following a government price cut which the petroleum minister insists is not aimed at next month’s presidential polls.
Petroleum Minister Anura Yapa said fuel subsidies will be completely removed from next year and that better management by the state-owned Ceylon Petroleum Corporation which runs the island’s sole refinery helped the government cut prices.
The CPC reduced the price of petrol and diesel by seven rupees a litre to 150 rupees and 111 rupees respectively and the price of kerosene by five rupees a litre to 81 rupees and 110 rupees for industrial kerosene with effect from midnight Friday.
The move follows prices cuts by the CPC in September when it reduced the petrol price by five rupees a litre, kerosene by 20 rupees and diesel by three rupees.
The reduction in the price of industrial kerosene and earlier cut in electricity prices will help boost the bottom line of ceramic firms whose kilns are big consumers of energy.
Yapa told reporters the latest prices reductions were possible because of a sharp decline in global crude prices, and better CPC management and collections from heavy state users of fuel.
"We have better debt collection from corporate entities like SriLankan Airlines, Mihin Air and Ceylon Electricity Board," Yapa said while crediting CPC staff for more prudent management.
“As petroleum minister I can’t be looking at election timetables and take decisions,” he told reporters.
“This reduction has nothing to do with the presidential election. We watched the market and felt we could reduce prices. ”
Yapa also said the reduced price levels could be maintained as long as crude oil remained around 75 US dollars a barrel.
"We will not sell below cost in future," he said noting that the CPC was hopeful of making an operational profit between four to eight billion rupees in calendar 2014.
The minister said unaudited accounts suggested that Saturday’s reduction will not have any significant impact on CPC’s bottom line, when asked about the impact of the pre-election price reduction, the second since September.
The CPC had an accumulated loss of 240 billion rupees, but they hoped to wipe out 150 billion rupees by way of a treasury capitalisation next year leaving them with a loss of 90 billion rupees, Yapa said.
The CPC hoped to return to complete profitability from late 2015 if oil prices and the exchange rate remained at current levels.