Sri Lanka raises fuel prices

May 11, 2007 (LBO) – Sri Lanka has raised fuel prices from midnight Friday with diesel going up by two rupees, petrol by one rupee and furnace oil by three rupees a litre, a Ceylon Petroleum Corporation official said.

This would push 90-Octane petrol to 106 rupees and 95-Octane petrol to 109 rupees with standard auto-diesel going up to 67 rupees and super diesel to 71.30 rupees.

The Ceylon Petroleum Corporation official said kerosene would also be going up by one rupee.

Ceylon Petroleum has two-thirds of the petroleum market in the country with Lanka IOC holding the balance.

Lanka IOC piggy-backs on Ceylon Petroleum pricing.

In Sri Lanka petrol is largely used by motorcycles, three-wheelers and small cars, while diesel is used by the commercial sector and richer sections of society, including politicians who use luxury jeeps and large cars.

About a third of the price of petrol is made up of taxes, while diesel is hardly taxed. There has been growing public anger at the way the government is over-pricing petrol and under-pricing diesel.

Furnace oil is largely used by industry. However auto-diesel is also used for power generation.

Sri Lanka does not have differential pricing for road diesel and non-road diesel.

Economists have been urging the government to raise fuel prices as fuel subsidies, sometimes financed with printed money from the central bank, has contributed to very high inflation and balance of payments problems in the country in recent years. However raising petroleum prices also cause losses in the Ceylon Electricity Board, where adjustments are also needed.