News

The government is to allow Lanka Indian Oil Company (LIOC) to determine selling prices of fuel products including petrol and diesel with effect from July 01.

The offer is made in lieu of paying the company the fuel subsidy which has accumulated to a staggering seven billion rupees.

This would mean that fuel prices could further increase in addition to last night’s increase.

Treasury Secretary P.B. Jayasundara told The Sunday Times that as a compromise deal, LIOC would be allowed to decide on fixing the price of fuel.

“In future the LIOC will be able to determine the prices according to market forces and is not required to abide by the government’s price formula,” he said.

The compromise between the Lanka IOC and the Treasury was reached after the company claimed that the government had to pay it more than Rs. 7,000 million in subsidy since January 2004.

LIOC Managing Director K. Ramakrishnan told The Sunday Times the government’s offer was yet to be discussed by the LIOC board, but the company was agreeable to the proposal to liberalise oil imports on lines similar to what the Indian government had adopted. The government decision has triggered a strong protest from Ceylon Petroleum Corporation trade unions. They have called a meeting of trade union representatives from the Ceylon Electricity Board (CEB), the Postal Department, the Sri Lanka Railway, state banks and the state transport sector on Tuesday to plan a countrywide general strike.

CPC Joint Trade Union President Lakshman Ananda told The Sunday Times they met Petroleum Resources Minister A.H.M. Fowzie on Friday and protested strongly against the government decision to allow the LIOC to determine fuel prices as this policy could have an adverse effect on the people and the CPC.
He said they warned the minister that what was happening in the LP gas sector where the private companies were raising prices regularly might happen in the fuel sector.

Minister Fowzie told The Sunday Times the government had no option but to end the pricing formula as it could not afford to pay the subsidy .

‘The government is incurring a loss of Rs. 2,000 million a month due to the fuel price formula and we cannot continue to face the losses,” he said.

Meanwhile many of the Lanka IOC sheds which had run out of fuel due to the financial crisis could take as many as 10 days to return to normal, Mr. Ramakrishnan said.

“We are trying to borrow money and buy fuel as soon as possible, but it may take between seven and ten days to restore supplies, ” he said.

The crisis seriously affected some outstations including areas in Vavuniya where long queues were seen yesterday to buy fuel.

The Lanka IOC has 100 sheds directly controlled by it while 60 more sheds are controlled on a franchise dealer basis.

Meanwhile, of the disputed subsidy arrears of Rs. 7,400 million, the Treasury and the Lanka IOC have reached agreement to waive off Rs. 2,500 million. Of the remaining sum, the government will pay Rs 1,000 billion in cash and the rest in Treasury bonds. Dr. Jayasundara said that it was an achievement to waive off Rs. 2,500 million.