Sri Lanka’ diesel-petrol price gap worsens

March 30, 2007 (LBO) – The gap between petrol and diesel prices in Sri Lanka has widened further overnight with a hike of 7 rupees a litre by state owned Ceylon Petroleum Corporation with the second player Lanka IOC following suit. The retail prices of a litre of 90-Octane petrol is now 104 rupees, 95-Octane petrol 107 rupees. Diesel and Super Diesel are selling for 60 rupees and 65.30 a litre.

Unlike low inflation countries with strong economic management, Sri Lanka follows the practice of countries with high poverty by cross-subsidizing diesel with margins from petrol or heavily taxing petrol while taxing diesel at lower rates.

After the latest price rise, the gap between standard petrol and diesel widens to 44 rupees from 37 or 42 percent.

Small man’s burden

In Sri Lanka motorcycle riders and three-wheeler taxis as well as small passenger cars use petrol, while businesses and high income classes including politicians use super luxury diesel-driven SUVs.

Diesel passenger vehicles have a punitive import duty, putting them beyond the reach of middle class Sri Lankans.

Lanka IOC, a unit of Indian Oil Corporation which now follows the pricing of CPC says it is making a three rupee loss on Diesel