News

While Sri Lankan fuel consumers are reeling under increasing fuel prices, the increases are unlikely to stop soon with the two oil companies trying to cover their losses and world oil prices sky rocketing.

In an interview with The Sunday Times, Lanka Indian Oil Company (LIOC) Managing Director K.Ramakrishnan said the current international price of a barrel of oil is $76 and is expected to rise to about $100 in the next year or so.

In comparison to this, LIOC lost Rs. 12 per litre sold in the past until the prices were raised by Rs. 5 rupees per litre by which LIOC now loses Rs. 7 per litre, he said.

“The Government covered this loss by subsiding it in the past but has failed to do it recently due to lack of financial resources” he said. “The loss we incurred within the last year was estimated at Rs. 7.8 billion. The Government couldn’t pay this so we asked for a reduced amount bearing some of the losses ourselves,” he said.

Since the Government could not pay any subsidy, it has allowed LIOC to set its own prices for fuel sold.

“The Government told us we can raise our prices to cover losses but we couldn’t raise the price by Rs. 12 per litre straight away because the change would be too drastic for the public to handle” he said.

When asked about the Rs. 2 difference in the CPC and LIOC oil prices and its effect on the company he said there was a 50% drop in sales on petrol and a 70% drop in sales of diesel.

“No one is going to purchase fuel at a higher price from our sheds, but on the other hand we are losing less money per litre now,” he said.

“The Government has promised to match the LIOC prices by raising CPC oil prices further to ensure that there would be no difference,” Mr. Ramakrishnan said. He also said LIOC had a responsibility towards its shareholders who were bearing the brunt of the losses.

“We cannot continue to overlook this matter from our shareholders’ perspective. It’s our duty to protect their interests,” he said.

Mr. Siripala Gamage, of the Lanka Petroleum Public Services Union told The Sunday Times that the reason for these fuel hikes was the unnecessary expenditure of the Petroleum Corporation in the past.

“By employing persons to fill unnecessary positions in the company we have to spend more on salaries and other perks. This naturally affects the fuel prices,” he said.

“Trade unions are being accused of resorting to instant strikes all the time but that is not true. We have implored the Government, with numerous letters and proposals, to reduce oil prices but haven’t any response for them,” he said.

Ceylon Petroleum Corporation chairman Jaliya Medagama told The Sunday Times the only reason oil prices are being increased is that international prices of a barrel of oil were also increasing. “The Government cannot afford to pay a subsidy so we are allowed to raise our prices to try to recover our losses,” he said.

But we still lose Rs. 9 per litre of petrol and Rs. 6 per litre of diesel, he said.

Regarding the promise to match LIOC prices Mr. Medagama said there was no such promise made by the CPC and he was unaware the Government made such a promise.

“Both companies were allowed to fix their prices to cut down losses but we were never going to match the LIOC prices. LIOC is a private company and we need not fix our prices to match,” Mr. Medagama said.