Sri Lanka to spend US$26mn on fishery fuel subsidies

Feb 21, 2012 (LBO) – Sri Lanka will spend 3.0 billion rupees a year on fuel subsidies to fishermen to help reduce the effect of a sudden increase in fuel prices fisheries minister Rajitha Senarathe said. Last year large multi-day boats were also freed from income tax for up to five years Senaratne said.

One fisherman was shot to death by the state in fuel protests.

Senaratne said an estimated 400,000 families on a food stamp program will also get 200 rupee worth fuel stamps a month at a cost of 80 million rupees a month.

Sri Lanka suddenly raised fuel prices because to battle a balance of payments crisis which sent the rupee down to 118 to the US dollar from 110 due to strong credit growth.

Credit to state enterprises was driven by losses at energy utilities. Sri Lanka’s rulers discarded a monthly fuel price adjustment formula in 2004 which had helped match the balance of payments to domestic demand pressure and keep the economy and exchange rate stable.

Rulers also twice undermined a price adjustment for power, which should have been implemented by the regulator in June 2011 and January 2012. Failed rains and higher thermal generation was a key trigger of higher state credit.