What started out as a fundamental rights case on the alleged fraud surrounding the Ceylon Petroleum Corporation (CPC) and the banks with which it went into oil hedging agreements which has now resulted in the revision of oil prices in the country, the removal of duty waivers given to Lanka Indian Oil Corporation (LIOC), the suspension of CPC's Deputy General Manager of Finance Lalith Karunaratne and the submission of documents showing that Standard Chartered Bank funded overseas trips taken by former CPC Chairman Asantha De Mel.
The 3-member Supreme Court bench headed by Chief Justice Sarath N.Silva ordered to bring down the price of litre of petrol to Rs 100 with effect from midnight on Wednesday by accepting the fuel pricing formula submitted by the Treasury Secretary. The Court directed the Treasury Secretary on Monday to work out a pricing formula with a price reduction on petroleum products with tax and levies not exceeding 100%, computing the sale price of fuel at $56.5 a barrel. The Court directed the Monetary Board (MB) to submit to the Commission to Investigate Bribery and Corruption the findings of the MB on the hedging agreement. The submissions to the Bribery Commission are to include the findings in relation to the benefits enjoyed by the former Chairman of the CPC Mr De Mel. The dealers and the CPC were ordered not to create shortages in petrol.
The judges also directed that according to the formula the excise duty should be Rs.40, customs duty Rs. 30, which is adjustable and handling and overhead charges of the Ceylon Petroleum Corporation Rs.9.71. The Chief Justice emphasized that the taxes should be in the region of 100 to 75 % of the price of fuel after the importation. Court directed that the upper tax limit on fuel should be 100% and the tax should be between 75% and 100% and that whenever the cost price decreases the benefit should be added by way of customs duty and whenever it increases from $56.5. The Chief Justice said that the suspension of the payments to commercial banks due from the hedging agreement and the drop in oil prices should be immediately passed to consumers.
According to the Court, levies on petroleum products which were previously 200% of the cost of fuel per litre for the consumer, now cannot exceed 100%. Experts said the pricing formula revision which cuts government taxes on petrol from 200% to 100% will make a huge dent in government revenue, a point made by the Treasury Secretary to the Supreme Court on Monday. Many economists understand the rationale behind slashing taxes but feel it will put the government in a difficult position because it is a large part of its revenue. If the government has to maintain its expenditure patterns, it must increase taxes in other areas or drastically cut down on expenditure.
The Court made an interim order suspending Lalith Karunaratne from attending any duties in the CPC since there is a danger of the relevant documents being tampered with. The interim order is operative until a further order is made by the Court on this mtter.
It was submitted in court that in the case of Lanka Indian Oil Corporation Ltd (LIOC), the overhead charges are less than that of the CPC and that LIOC is the beneficiary of certain subsidies that had been previously given by the government of Sri Lanka. The Secretary to the Ministry of Finance was directed to take these aspects into account in computing the rebate to be given of customs duty to LIOC products so that petroleum products can be sold at a uniform price by the CPC and LIOC without the latter making an undue gain as a result of the intervention by the Court. On Wednesday, the Court found that the duty waiver given to LIOC should be scrapped and that the company should revise their prices accordingly.
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