"Thus, it seems that the majority of the loss of the Petroleum Corporation has occurred mainly due to the Electricity Board," a finance ministry statement said.
"The private sector could raise their profit volumes because they buy fuel at concessionary prices.
"The general public of the country also could enjoy a low inflation rate as the Petroleum Corporation was supplying fuel at concessionary prices while incurring losses."
Sri Lanka raised fuel prices steeply and slapped a surcharge on power tariffs after credit taken by state enterprises contributed to pressure on a dollar peg, with the rupee falling from 109 to 120 rupees so far.
CPC sells petrol at a large profit with the Treasury also charging a 25 rupee excise tax in addition to port and airport levies. Diesel was also sold below cost but there is a 2.50 rupee excise tax.
The finance ministry statement said that the CPC was not even able to pay the Treasury taxes collected from petrol or diesel sales in January.
The utilities had borrowed from state-run banks to cover losses.
"No matter how much the price goes up, the country still needs fuel," the finance ministry said.
"Thus, the Bank of Ceylon and the People’s Bank faced a huge crisis by supplying loans to the Petroleum Corporation.
"The crisis in the Petroleum Corporation and the Electricity Board became worse. Raising the fuel prices is the only alternative that the Government could take at this juncture."The Electricity Board incurred losses even from the hydro-electricity which is generated profitably in our country."
The CEB sold power to some consumers at 4.50 a unit when even hydroelectricity, which was the cheapest source of power, cost 6.50 a unit, the statement said.
The finance ministry said 60 billion rupees due to banks from CPC settled from a 60 billion rupees transfer to the firm from the budget.
If prices were not raised, the CPC would have lost 200 billion this year, the statement said. Sri Lanka imports 60 percent of its oil requirements as refined products.
A refinery at CPC also produces less light distillates and more furnace oil, which are slightly cheaper than diesel or petrol.