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Fri, 31 October 2014 08:01:54
Sri Lanka raises petrol, furnace oil prices
15 Dec, 2012 09:09:45
Dec 15, 2012 (LBO) - Sri Lanka's state-run Ceylon Petroleum Corporation, has raised petrol by 10 rupees to 159 and two grades of furnace oil but kept diesel and kerosene prices unchanged petroleum minister Susil Premajayantha said.
One grade of furnace oil has been raised to 90 rupees from 65 and another from 75 to 100 rupees a litre, he said.

"Furnace oil is where we make the biggest losses," minister Premjayantha said.

The petroleum utility makes large profits and the Treasury collects high percentage of taxes from petrol.

Refined petroleum was about 92 rupees in the Singapore market Friday (114.15 US dollars a barrel) but is retailed in Sri Lanka at prices far below cost.

Refined diesel is about 99 rupees a litre (122.8 US dollars a barrel) in the Singapore market but is retailed at only 115 rupees a liter.

The latest price increase widens the gap between underpriced diesel which is used by business and luxury SUV owners and overpriced petrol which is used by small car and motorcycle owners.

Motorcyle users and car users effectively end up subsidizing buses, including those used for tourist transport, and even trucks used in export industries and construction as well as fishing boats.

Bus owners however are a powerful lobby group.

Sri Lanka does not have a fair and transparent cost-based price formula for refined petroleum and prices are raised on an ad hoc basis by rulers.

Underpriced energy funded with bank loans, which are ultimately accommodated by central bank credit (printed money) causes frequent balance of payments trouble in Sri Lanka leading to currency depreciation and inflation.

In Sri Lanka there is a peculiar belief that inflation is related to petroleum prices - specifically diesel - despite repeated evidence to show that manipulating energy prices with central bank credit causes both inflation to go up and currency to depreciate.

In most low inflation countries, diesel is priced higher than petrol and the prices change daily.

Opposition groups also oppose fair and transparent pricing when it is attempted.

In February the current administration partly corrected the diesel mis-pricing as part of efforts to recover from balance of payments trouble, but the elected political genre that is currently in opposition heavily criticized the move.

Analysts have said that cost-based pricing is needed to ensure economic stability as well as social justice. Next year Sri Lanka's Public Utilities Commission is expected to take-over petroleum prices after enabling legislation is passed.

The World Health Organization has also published research that diesel engine emissions are carcinogenic.

Update II

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READER COMMENT(S)
5. Roh Dec 18
Sri Lanka has 3 large burdens. Its government, the public service and their perks. If SL can scale down these by half its present size, billions could be saved and in turn taxes could be reduced to make living more bearable.

Also levy Rs. 1.00 per day on Medicare per person. That's 22 Million Rupees income per day to to fund the healthcare system. That money can come out of everyone's pay check. After all even labourers spend so much on Beedi and cigarettes everyday.

4. ha ha Dec 15
If the poor man's meal is to be made more affordable the state should stop taxing rice, dhall, wheat, tinned fish to these unbelievable heights. Our food prices are among the highest in Asia despite subsidized diesel. Oh puleeze.

The more state intervention there is more people suffer. This country has employed poverty. That is purely due to the burden of the state

3. Paradise Dec 15
This article is biased.
An increase in Diesel prices would've created a ripple effect in prices of all commodities, including the essentials. As diesel is used mostly for public/goods transportation. An increase in Diesel prices would've hit the poor much more than the mere difference in rupees in Diesel prices.

It’s very wrong to say that diesel is used for SUV’s of the rich, when the percentage of diesel pumped to such vehicles is probably less than 10% from the whole countries consumption.

Increase in petrol prices to cover the losses in Diesel prices could be seen as taxing the rich to pay for poor man’s diesel, in turn the poor man’s margin, in turn his meal.

The readership of LBO will respect LBO as long as LBO says right to right and wrong to wrong. Don’t think articles of this nature meets such standards.

2. Wadda Podda Dec 15
I suppose this would appreciate the Rupee to the USD, am I right fb. Fortunately, the USD is also weakening against the Euro so it's a good time to say that due to the right fiscal measures the rupee is appreciating.
1. ADO Dec 15
This artical is stupidly written
The latest price increase widens the gap between underpriced diesel which is used by business and luxury SUV owners and overpriced petrol which is used by small car and motorcycle owners. - what about the buses on public transport?