Fuel prices | Daily News

Fuel prices

The LIOC has decided to raise fuel prices but not so the Ceylon Petroleum Corporation. According to CPC Chairman Dhammika Ranatunga, they will not increase fuel prices at present or in the future. “Lanka IOC could not bear any further losses and therefore the company decided to marginally increase the selling prices. Still, full losses have not been passed onto the customer, he stated in a communique. The price increase by LIOC is a nominal Rs. 5 for petrol and Rs.9 per litre for diesel, effective from midnight last Friday.

The LIOC market share is very limited and is confined to merely 100 fuel stations. Hence, this will not have much of an impact on motorists who, according to reports, are now having their fuel pumped at CPC run fuel stations, in increasing numbers. This in turn could swell the coffers of the CPC which is perennially in the red, but not to the extent of overcoming the massive losses it has incurred due to the generous subsidies dished out to the public, since the advent of Yahapalanaya, and due to the massive sums owed to it by state institutions.

The LIOC has been requesting for a price revision for sometime now and the increase in the dollar rate vis-a-vis the rupee must have certainly forced its hand. It is not known for how long the CPC will be able to resist an upward revision of fuel prices, given the circumstances.

Be that as it may, the Yahapalanaya government should be commended for reducing fuel prices, even incurring massive losses in doing so, since it assumed office three years ago. This was in sharp contrast to Mahinda Rajapaksa who increased the fuel prices even when the world price of crude oil had dropped drastically, during the tenure of his regime. It introduced a fuel price formula merely to throw dust in the eyes of the public. Fuel prices were jacked up when prices rose in the world market but when the prices plummeted no corresponding decrease was effected.

The reduction in the fuel prices under the present regime went to a large extent in cushioning the cost of living burden on the populous. Today, the Joint Opposition keeps on talking about the VAT imposed on the people and points to this being the chief reason for the increase in the CoL. It fails to talk about the massively subsidized fuel prices, but for which the CoL would have shot up into the stratosphere. The government, for its part, failed to drive home this point even during the local government election campaign and paid a huge price for it. At least now it should inform the people of the benefits that accrued to them by maintaining fuel prices at such a low level.

According to a report, during the last year alone the CPC had incurred a total loss of Rs. 5460 million on the sale of kerosene, as a loss of Rs. 48 was incurred on each litre which was sold at a subsidized price of Rs. 44. Petroleum Minister Arjuna Ranatunga stated, the loss incurred in the sale of kerosene during the first two months of the current year stood at Rs.2146 million. Accordingly, the annual loss on the sale of kerosene has been estimated at Rs.12,876 million. How long it can keep on incurring such losses is the question.

However, the government will have little option but to continue with the present fuel subsidy, the removal of which will have a knockdown effect on the general price structure of almost all goods and services and be politically costly for the government, what with provincial council elections round the corner. The first to be affected will be transport costs which will have a ripple effect on the prices of even the simplest of items such as vegetables. The private bus owners will lose no time in demanding an increase in bus fares to be followed by tri-shaw operators. An increase in diesel prices would also see a surge in electricity bills, what with 60% of power generation dependent on thermal power, the prolonged drought further complicating matters. Norochcholai also seems to be still having hiccups, not operating to its full capacity. It is time that the government considers exploring the prospects of alternative energy. Many possibilities such as wind energy had been in the pipeline for a long period but nothing seems to have moved out of the blueprint stage.

Urgent steps should also taken to avert a fuel crisis like the one witnessed by the country some six months ago, which also had its spinoff effects on the local government election results. Poor quality of the imported fuel was blamed for non issuance of fuel to the filling stations. The Minister, no doubt, would have been mindful of the earlier occasion when contaminated fuel was distributed during the former regime, forcing the government to pay out heavy compensation for the damaged vehicles. The quality of the fuel should be tested prior to the origination of the shipments. There is also the urgent need for increasing the storage capacity to meet any contingency. 


 

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