Fuel price hike on the horizon if no tax cut
View(s):Petrol and diesel are set to become costly as international oil prices continue to rise compelling the government to mitigate with appropriate tax reduction or removing import duty surcharges — without burdening the public.
The benchmark Brent crude oil price is seen increasing to US$ 60 -70 per barrel from the current average level of $49 per barrel this year, official data showed. In the wake of sharp rises in world fuel prices, State Minister of Energy Udaya Gammanpila recently disclosed that the Ceylon Petroleum Corporation (CPC) is incurring a loss of Rs.10 for a litre of diesel and Rs. 17 for a litre of petrol.
CPC losses in fuel trading had increased to Rs.100 billion last year due to the depreciation of the rupee and overhead costs.
Thereby he noted that if the tax imposed earlier during the period of fuel price decline, is not reduced, it will lead to a local fuel price hike in the future.
Heavy costs on overheads and debt servicing of CPC and losses in fuel imports from volatile market under high customs duty incurred by Lanka IOC have made it difficult for the two entities to maintain the fuel price at present levels.
Despite losses incurred in fuel imports, drop in sales along with overheads during the COVID-19 lockdown period, Lanka IOC maintains the fuel prices at the same level of the CPC, its Managing Director, Manoj Gupta said.
The company is losing Rs. 7 to 8 per litre by selling petrol and diesel at current prices; he said adding that they welcome a considerable reduction in the customs duty to continue retail trade without any price hike till the end of the year.
He expressed the belief that the Treasury will consider the Lanka IOC request favourably to reduce taxes since the company has considerably contributed to enhance state tax revenue.
The Finance Ministry has brought back the import duty surcharges (taxes) on refined fuel for three months till November 2020 and it has been extended up to February this year, other officials said.
They added that it will not affect fuel pricing as the CPC and Lanka IOC will have to bear this additional tax cost. (BS)