The escalating prices of fuel has caused consternation all over the world, as Governments scramble to find ways to give fuel at a reasonable price to consumers without seriously impacting on their coffers. Sri Lanka is no exception. Fuel prices saw a hike on a couple of occasions during the last few months, but still our fuel prices are below those of many Asian nations in Rupee terms.
There are a few factors that have caused the fuel price hike. The US sanctions on Iran, which will come into effect on November 5, have already caused a constriction in the global oil market, Iran being one of the biggest producers of oil. The situation with regard to Saudi oil output could also change due to the ongoing concerns over the Jamal Khashoggi disappearance case. Moreover, the depreciation of many currencies against the US Dollar has made oil imports more expensive. Net oil importers such as Sri Lanka have been adversely affected by all these factors.
Asian Governments including Sri Lanka which traditionally subsidize fuel used for public transport have been exploring options that would not upset the status quo. The Government raised petrol prices on a number of occasions but it has been careful to avoid a substantial rise in normal diesel prices used by trucks and buses (the super diesel variety is generally used for luxury diesel vehicles). Any rise in normal diesel prices tends to have a ripple effect on passenger and goods transport costs, which is generally passed on to the hapless consumer. In fact, when fuel prices were raised a week ago, normal diesel prices remained unchanged. The same applies to kerosene, which many households still use for cooking and lighting purposes.
There is a notion that any hike in Petrol 92 and Petrol 95 prices will not affect the economy so much, since petrol is mostly used for private passenger cars. This is true to some extent – the passenger car user must pay for the privilege and he or she has the choice not to use the car for non-essential journeys. Other options such as public transport and ride hailing services are available in case they give up the car.
But this is not a complete picture. One cannot forget motorcyclists and three wheeler operators, drawn mostly from the lower middle class. An increase of a litre of petrol by even 5-6 rupees means a lot to them as they have to juggle among the high Cost of Living and the leasing and fuel costs. There are only around 700,000 private cars in circulation whereas there are around 1.2 million three wheelers, out of which around one million are used for passenger hire. One cannot dismiss the immense service they render for “last-mile” transport (say, from the train station to the passenger’s home), the school and hospital run in remote areas and to the SME sector. We have discussed their somewhat miserable road safety record in these columns, but that does not diminish their importance to the economy in both rural and urban areas.
Hence the idea of introducing a cheaper, low octane variety of petrol especially and specifically for three wheelers, as announced by Petroleum Minister Arjuna Ranatunga. This petrol variety can apparently be priced Rs.8 lower than Petrol 92 if duties and taxes remain at present levels. However, if these too can be reduced by even a few rupees, there could be an even greater saving at the pump.
This is a welcome move, given that the petrol price hike hit the three wheeler industry hard. Tests are also reported to be underway to determine whether this petrol variety can be used for some of the older motorcycles in use. (Most modern motorcycles have highly advanced engines which will not take kindly to lower Octane fuel and the cheaper fuel is a strict no-no for passenger cars, despite their age).
However, there are a few concerns that must be addressed by the authorities and the three wheeler industry. Three wheeler associations have already increased the fares by at least Rs.10 per kilometre. It will be very difficult to get them to come down from this figure, even if petrol is issued at a lower price. Besides, they can always tell a passenger that regular petrol is being used even if the cheaper variety is actually in the tank.
Moreover, the authorities should clarify the effect of the new fuel variety on the environment. Some of the older three wheelers have sputtering two-stroke engines which will make the emissions even worse with a lower quality petrol. They must also clarify where this fuel will be available – just 100 filling stations for the entire country, at least in the initial stages, will not be able to fill the demand. As an aside, three wheeler drivers should not be allowed to fill up if they have passengers inside, which could be highly dangerous. This rule already applies to passenger buses. The Government must also expedite preparatory work on a three wheeler regulatory authority to give a better deal to both operators and passengers.
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