Court Formula

Dec 15, 2008 (LBO) – Sri Lanka’s Supreme Court said the island’s taxation of petroleum products was irrational and asked the Treasury not to tax petrol more than 100 percent of cost and margins. He rejected suggestions that diesel was sold at a loss, saying the government was charging 21 rupee of taxes a litre.

Diesel is now priced at 80 rupees a litre. Opposition lawmaker Ravi Karunanayake who filed a public interest petition over petrol pricing said diesel was sold to ships at just 48 rupees a litre.

This showed that the real cost of diesel was far below the retail prices.

Court said if the price of petrol moved up taxes should be reduced to 75 percent of cost and margins up to 100 dollars a barrel, and thereafter charged on a different basis.

Court said import duties could be changed to take a large slice of tax from Lanka IOC, to reduce its profits.

Unlike the overstaffed CPC, Lanka IOC has lower costs and is run much more efficiently.

A petitioner told court that Lanka IOCs marketing unit only had 60 odd staff, compared to 260 or so for CPC.

Court ordered the treasury to come up with a formula based on the court guidelines on December 17.

Before i