Government Re-evaluates Private Fuel Distribution Contracts Amid Subsidy Extensions and Market Disruption

Sri Lankan President Anura Kumara Dissanayake announced that the government is reviewing initial contractual agreements signed with private fuel distributors to address supply bottlenecks and pricing disparities between private retail outlets and the state-owned Ceylon Petroleum Corporation (CPC).

Addressing business leaders at the Sri Lanka Economic and Investment Summit 2026, President Dissanayake outlined the fiscal measures taken to cushion domestic industries and households against volatile global energy prices caused by ongoing Middle Eastern conflicts. To prevent economic shock and preserve GDP growth momentum, the government allocated Rs. 60 billion during the first five months of the year, providing a Rs. 100 per litre relief on diesel and Rs. 20 per litre on petrol. Despite a brief suspension of energy subsidies in September, escalating global prices prompted a fresh Rs. 41 billion relief package spanning October through December, maintaining a Rs. 70 per litre government subsidy on diesel.

The President noted that while the state utility CPC has absorbed price pressures—generating a net profit of Rs. 28 billion so far—private fuel distributors facing cost pressures have restricted distribution rather than matching state retail rates. Private distributors had sought price hikes of up to Rs. 132 per litre for diesel, creating a stark price divergence with CPC stations and pushing the state utility’s market share in diesel distribution up to 77 percent from 58 percent.

Because existing agreements limit immediate legal remedies against private firms restricting sales, the administration has submitted these contracts to the Attorney General’s Department for a comprehensive legal review to amend their terms. To ensure uninterrupted national supply, the government is expanding state retail infrastructure with 75 new CPC fuel stations in areas currently reliant on private distributors, while reiterating that the state remains fully prepared to absorb the remaining market if private operators fail to meet distribution commitments.