Rising tensions in oil rich West Asia and North Africa and losses due to reduction of taxes will lead to hikes in fuel prices, but the government is yet to decide whether it would be on petrol only or diesel as well.
Petroleum Resources Minister Susil Premajayantha told the Sunday Times, “We are studying the prices in view of the losses suffered,” but he declined to give any more details.
The Sunday Times learns that the Petroleum Ministry and the Treasury are studying the price structure before the proposed increase comes into effect after April.
Ministry sources said they were discussing whether the prices of both petrol and diesel should be increased or whether only petrol prices should be increased in a manner that would cover the losses from any diesel subsidy.
Mr. Premajayantha said the government was suffering heavy losses by subsidising fuel prices.
Earlier this week President Mahinda Rajapaksa told Parliament the government would be able to provide fuel at a subsidised rate only if it was able to bear the sharp increase in international prices.
He said that the tax of Rs. 75 on a litre of petrol had been reduced to Rs. 25 while only a tax of Rs. 2.50 was being imposed on a litre of diesel. He said no tax was imposed on kerosene and it was being sold at a loss of Rs. 20 a litre.
Last month the Lanka Indian Oil Corporation (LIOC) increased the price of a litre of diesel by Rs. 5 and called on the Ceylon Petroleum Corporation also to increase the price.
In the aftermath of the turmoil in the Middle East, crude oil prices have increased over the weekend to about US $ 115 a barrel from about US $ 85 a month ago.