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Fuel price hike: CPC, Treasury in conflict
The Ceylon Petroleum Corporation (CPC) and the Treasury continue to remain locked in a controversy over how to increase prices of fuel amid a crisis of rising world oil prices and the Sri Lanka rupee depreciating to the lowest levels against the US dollar.
CPC Chairman Dhammika Ranatunga told the Sunday Times, “we are seeking a price adjustment with tax concessions.” However, the Treasury, the Sunday Times learns, has rejected the CPC’s proposal and wants the CPC to have a pricing formula linked to world oil prices reviewable periodically.
In the ensuing disagreement, the CPC losses keep mounting. Since its counterparts, the Lanka-India Oil Company increased prices; there has also been an increase in the sale of CPC stocks from its outlets. There are fears that the financial losses of the CPC may rise.
Now, the CPC and the Treasury have agreed to place their respective proposals in writing to enable the Cabinet of Ministers to decide on the best possible course of action.
Treasury officials say they are livid that over the years mismanagement had led to mounting losses at the CPC. This is in addition to vast amounts of money overdue from the Ceylon Electricity Board (CEB) and SriLankan Airlines for fuel supplied on credit. The amount is said to be more than Rs 75 billion.
CPC Chairman Ranatunga said that in addition to imposing the credit limit, the CPC had worked out a new arrangements with the two state enterprises to collect the arrears. He said the CPC had decided to stop supplies on credit to the CEB, but the Government had intervened and agreement was reached to repay Rs. 62 billion from the arrears.
CEB Chairman W.B. Ganegala said the board was having consultations with the National Savings Bank and the People’s Bank to obtain a Rs. 25 billion loan within two weeks while the rest of the arrears to the CPC would be paid back in six months.
He said that arrears had accumulated because the Treasury which had promised to pay Rs 53 billion for the fuel bill incurred during the 2016/2017 drought period, had paid only Rs 6 billion. The CPC chairman said the Sri Lankan Airlines which had an arrears of Rs 13 billion had agreed to pay its monthly bills promptly while settling Rs 9 billion of the arrears within the next three years.
Mr Ranatunga said the CPC’s proposal to the Cabinet would explain why it was opposed to a pricing formula based on world market trends and its impact on the CPC and consumers. He said such a pricing formula would also benefit the LIOC.
He said that instead of a formula, the CPC was seeking a price adjustment along with a tax reduction. But a senior Treasury official said offering tax concessions to the CPC was out of the question and the Treasury believed the pricing formula was the best option where prices would be reviewed two to three times a year keeping with world market prices.
He said the Treasury was considering the introduction of a new tax structure with an equal impact on the CPC and the LIOC. The official said the Treasury proposals would be submitted to the Cabinet within two weeks for a final decision.
Meanwhile, the latest financial situation of the CPC shows that currently the CPC has outstanding loans amounting to US$ 2.5 billion including and outstanding loan to Iran amounting to US$ 250 million.
The current fuel import bill of the CPC amounts to US$ 400 million a year while during the first three months of this year the CPC has suffered a loss of Rs 11 billion.