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Fuel prices likely to soar

  • LIOC strikes fresh deal with government

Fuel prices are likely to go up with petrol probably shooting above the Rs. 100 mark after an imminent new deal between the Lanka-Indian Oil Company and the government.

The LIOC and the Ceylon Petroleum Corporation will reach agreement on marketing fuel at the same prices under a new deal to be finalised within the next two weeks, LIOC Managing Director K. Ramakrishnan said.

This is in contrast to earlier government claims that the CPC will not be forced to market fuel at the same price as LIOC after lifting the government-controlled price formula system.

The fresh agreement between the LIOC and the Treasury is to be signed after the government decided that no more subsidies will be paid to the Indian company and instead it could decide on the prices.

LIOC has said it will fix fuel prices according to world market rates and over the weekend – with the volatile West Asia at a flash point – world crude oil prices soared to their highest rate of 78 US dollars a barrel. According to what Mr. Ramakrishnan says the CPC also will fall in line with the prices fixed by the LIOC.

Mr. Ramakrishnan said the company had reached agreement on the particular clause with the government and this would mean the LIOC and the CPC would be selling fuel at the same prices.

Mr. Ramakrishnan said the LIOC had pointed out that the original agreement stipulated that a level playing field should be provided –meaning that both companies should sell fuel at the same prices. This in turn would mean that if the LIOC increased its prices, the CPC-run fuel stations would also have to increase their prices.

Petroleum Resources Minister A.H.M. Fowzie said he was not aware of the details of the agreement to be signed as the Treasury was finalising it. However Mr. Fowzie had earlier said the CPC should be able to determine its own prices and that the LIOC could determine its own prices.

Treasury Secretary P.B.Jayasundara when contacted by The Sunday Times said he was out of the country and could not comment on the issue till he came back. The controversy over fixing fuel prices came up after the LIOC insisted that the government should pay an overdue subsidy amounting to Rs. 7,000 million. The money was overdue from January 2004.

The government agreed to pay part of the disputed subsidy immediately and the rest in the form of Treasury bonds. These developments came as the JVP-backed trade unions held a protest outside the Kolonnawa oil refinery on Friday, accusing the government of indirectly giving LIOC a monopoly role in fixing fuel prices.

For the past two months, some 160 filling stations selling LIOC fuel have been virtually shut down due to the dispute over subsidies. With a settlement reached, Mr. Ramakrishnan said yesterday that LIOC filling stations would get supplies from next week.

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