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Tue, 31 March 2015 02:30:21
Sri Lanka to hold retail fuel prices till mid-April
13 Mar, 2008 19:26:09
March 13, 2008 (LBO) – Sri Lanka's petroleum utility will not raise retail fuel prices at least until the traditional April Sinhala and Hindu New Year festival, despite record crude oil prices, petroleum minister A H M Fowzie said.
The state-owned petroleum utility Ceylon Petroleum Corporation (CPC) will use profits from overcharging hapless petrol uses and gains from crude oil futures hedging to maintain prices and subsidise diesel and kerosene.

"Even if world oil prices go up we don't want to heap more burdens on consumers," Fowzie told a news conference Thursday. "We will earn profits through other ways and continue the subsidies."

CPC's practice of fleecing petrol users, such as small car owners and motorcycle users and giving benefits to diesel users especially businesses and fleet-owners, has come under fire from some critics.

A CPC statement issued today admitted that through the last price increase on January 13 the utility overcharged petrol users by 18.55 rupees and gave an 11.47 rupee subsidy to diesel users.

However, no consumer has so far taken either the CPC or the Lanka IOC - which piggy-backs on CPC prices - for unfair trading practices.

In the international market refined diesel (gas-oil) is more expensive than petrol but in Sri Lanka petrol is sold at 127 rupees a litre and diesel at 80 rupees a litre. Kerosene is sold at 70 rupees litre with a loss of 15.50 rupees.

CPC's practice of holding prices has also been blamed for creating macro-economic imbalances by some analysts, especially when losses are topped up by borrowings from the banking system.

Fowzie say CPC is not in a position to raise retail fuel prices immediately in keeping with increases in world oil prices nor can it reduce retail prices after a fall in crude prices in the same way.

An earlier price formula used a lag of one month to set prices.

By the last price increase CPC had managed to reduce average monthly losses from kerosene and diesel sales to 1.1 billion rupees in the last three months from 1.3 billion rupees previously, the minister said.

Fowzie said the CPC had made a profit of over 500 million rupees from oil futures hedging in March while its refinery makes a profit of 600 million rupees a month which will help it maintain present prices.

Fowzie also said the CPC has also been able to make savings by importing bigger shipments of crude of 60,000 metric tonnes, compared with 20,000 MT earlier.

Crude futures topped 110 US dollars in international markets amid monetary loosening by the US Federal Reserve that has driven the dollar down and worsened a global commodity bubble.

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