Financial Times

No petroleum price hike yet
Soaring petroleum prices have placed a bigger burden on the Ceylon Petroleum Corporation (CPC) but the new government has not yet taken a decision to raise domestic fuel prices, its chairman Jaliya Medagama said.

Under the new pricing formula, the CPC adjusts prices on a monthly basis taking into account fluctuations in international prices and other factors. That adjustment normally happens in the third week of the month, officials said.

Medagama said if the formula was strictly adhered to, the price of a litre of petrol should have gone up to Rs 64."International prices are rising daily but the government has not yet decided on revising domestic prices."

The government has agreed to provide subsidies to CPC and the Indian Oil Corporation if they are not allowed to raise domestic prices in keeping with international prices in order to minimise the impact on the cost of living.

Medagama said the subsidy to the CPC in the first quarter of this year alone amounted to about Rs 1.5 billion."The understanding is that if we are not allowed to raise prices, the Treasury will pay the difference."

The steady increase in international petroleum prices was originally attributed to winter demand in the northern hemisphere. But now prices believed to be driven by unexpectedly heavy demand from China and a decision by Middle Eastern producers to cut production.

"Normally there's a big difference between petrol and diesel but now both are around $40 per barrel," Medagama said. Crude oil was hovering between $32-35 per barrel.

Back to Business