Government likely to drag feet on cost-reflective fuel pricing formula
„Petroleum Minister says Govt. yet to fully commit to implement price formula „Says some companies should be run for the people as social service
The Sri Lankan government has not yet fully committed to the implementation of a cost-reflective fuel pricing formula and is leaning towards maintaining current subsidised prices, Petroleum Resource Development Minister Arjuna Ranatunga told a press conference yesterday.
“The Finance Ministry wants to reduce its losses but what I’m looking at is that there are some companies which can be run at a profit. Some companies should be run for the people, like a social service, despite making losses.
The government has to decide whether we should give subsidies and continue to make losses, or whether we should increase prices to make profit,” he said.
According to Ceylon Petroleum Corporation (CEYPETCO) officials present yesterday, CEYPETCO has made an operational profit of Rs.5 billion in 2017 and a net loss due to recovery in oil prices, while in 2016 during low oil prices, the operational profit was Rs. 67.1 billion and the net profit was Rs. 62.8 billion. CEYPETCO only makes profits with sales of jet fuel, with petrol, diesel and kerosene being subsidised.
With the increase in global oil prices in recent months, Lanka IOC, which is the only competitor to the state-owned CEYPETCO, requested the government to increase prices to maintain margins.
However, according to Ranatunga, the government at this point in time is not supportive of a price increase in petroleum.
“I think the government is not very keen on increasing the prices,” he said.
However, Ranatunga said that a pricing mechanism is also required, creating some confusion. “I think that (a pricing formula) should come in, but ultimately we as a government have to sit together and take this decision. We might consider that in the future. It shouldn’t be something that I implement but something that is implemented at the right time,” he said. With key national elections coming up in 2019 and 2020, there is speculation that the ‘right time’ will not appear over the next two years.