New fuel import tax to reduce Covid-19 economic risk
View(s):The Finance Ministry will soon impose a fuel import tax while maintaining the current petroleum prices so that the profit margin can be acquired by the Government when importing crude oil.
This decision has been taken by considering the risk prevailing in the Sri Lankan economy due to the global economic slowdown as a result of the coronavirus outbreak.
Total taxes on fuel are in the region of Rs. 57.65 rupees (49 per cent of the actual cost per litre) on average per litre retail price.
Cabinet spokesman Minister Bandula Gunawardena told the Business Times that this will create a level playing field for the Ceylon Petroleum Corporation (CPC) and Lanka IOC without accruing any undue advantage out of the drastic drop in oil prices which has fallen to US$24.42 a barrel, the lowest levels since June 2002.
Sri Lanka will keep oil prices fixed and build a Rs.200 billion fuel price stability fund utilising the savings from the price deduction of fuel in the international market while collecting revenue within a period of six months under the said fund, he added.
This new tax is to be levied on fuel to increase state revenue from oil distributors and build this fund, which will be used to repay debt of the CPC and Ceylon Electricity Board (CEB), he explained.
Provision of Rs.50 billion will be made to the CEB from the fund so that a deduction can be made from the amount payable to the CPC by the CEB, he noted.
By supplying crude oil at Rs. 70 per liter to the CEB, the CPC would be able to settle the bank loan and its interest by deducting more than Rs.30 billion from the expenditure spent for generating thermal electricity, he added.
Minister Gunawardene said the CPC has incurred a loss of Rs.100 billion in 2018, despite a pricing formula under the previous regime.
If the CPC is able to operate on profits by holding on to part of the profit due to fall in world oil prices it would able to pay back loans reducing pressure on the credit system, he added. (BS)