Fleecing Ethics

Jan 18, 2007 (LBO) — Sri Lanka’s opposition has added fuel to the growing fire over petroleum firms fleecing petrol users to give subsidies to diesel consumers especially in commercial sectors. Sri Lanka’s government also taxes petrol users heavily but now the two main fuel distributors, Ceylon Petroleum Corporation and Lanka IOC, a unit of Indian Oil Corporation have started to overcharge petrol users heavily.

The overcharging happens despite a stated government policy of limiting margins of utilities to 1.5 percent above costs.

Fat Margins

Opposition lawmaker Kabir Hashim charged this week that the state-owned Ceylon Petroleum Corporation (CPC) overcharged petrol users as much as 14 rupees per litre above actual costs, and Lanka IOC, that has a third of the market, as much as 18 rupees.

CPC’s costs are higher as decades of ‘stuffing’ the utility with supporters of politicians has left it with thousands of excess staff, while Lanka IOC is a lean operation that is tightly managed.

Refined petrol is cheaper than diesel in international markets, but in Sri Lanka diesel is sold at a lower price than petrol, partly because politicians in the island seem to believe th