ECONOMYNEXT – Sri Lanka’s fuel prices would have fallen in February if a monthly fuel price formula was not abolished by the new administration opposition leader Sajith Premadasa said in parliament.
“The central bank reports says the price of crude oil has decreased by 10 percent from September, 2019 to February 14, 2020.” Premadasa told parliament.
“The government is getting a profit by not reducing the price and it is affecting the general public.”
He said the previous administration raised fuel prices under the formula and also reduced prices when world prices came down.
Premadasa said according to the new prices in the world market the price of diesel could be brought down from 104 rupees to 91.92 rupees per liter, Petrol Octane 92 from 137 rupees to 124.30 rupees per liter and Kerosene oil from 70 rupees to 58.80 rupees per liter.
Sri Lanka charges taxes on fuel, with the highest taxes from petrol, and lower taxes from diesel.
Petrol is the cheapest product to import than diesel or kerosene. Kerosene, sold at the lowest price is usually the most expensive to import.
In Singapore market benchmark Petrol prices were 63.05 US dollars per barrel, diesel 64.78 US dollars and kerosene 64.27 US dollars on February 19 according to central bank data. Brent crude was 58.07 dollars a barrel.
On September 10, refined petrol was 67.80 dollars a barrel, diesel was 74.46 dollars and kerosene 76.49 dollars a barrel. Brent crude was 62.65 dollars a barrel.
Minister Bandula Gunawardena told reporters on Thursday that there were losses (after taxes) from the sale of diesel and petrol.
“As soon as we get those losses covered we will decrease the price,” he told reporters at the weekly post-cabinet press briefing.
Deshal de Mel, Research Director at Colombo-based Verete Research said oil prices were expected to be around 50 to 60 dollars in the future.
Sri Lanka’s new administration has slashed a number of taxes including value added tax, reducing state revenues.
Energy Minister Mahinda Amaraweera said while the new administration would not have a monthly fuel pricing formula, prices would be adjusted periodically.
Sri Lanka has a tendency to subsidize fuel prices, forcing state-run Ceylon Petroleum Corporation to borrow, which in turn drives up interest rates.
When the central bank prints money to keep rates down, the rupee falls.
However during 2018, the Ceylon Petroleum Corporation ran an 80 billion rupee forex loss, despite the price formula as it was apparently forced to borrow dollars, despite having cash from the formula, effectively nullifying any benefit from the price formula critics have said. (Colombo/Feb21/2020)