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Fuel price hike next month as Govt., LIOC discuss new deal

By Malik Gunatilleke

Beginning September CPC and LIOC fuel prices will be increased, but the agreement between the LIOC and the Treasury is set to be further delayed, trade sources said.

Petroleum Minister A.H.M. Fowzie told the Sunday Times the CPC would also raise its fuel prices in September, but the increase in rates was yet to be decided.

“We do not know by how much as it is still being discussed. But by September we will have no choice but to increase it,” he said.

LIOC Managing Director K. Ramakrishnan said the LIOC fuel prices would be increased by seven rupees in September enabling them to avert further losses.
“We cannot continue to sell fuel at a subsidized rate when we are receiving no subsidy from the government. From September we will have no choice but to raise the prices,” he said.

However, the Treasury and the LIOC are unlikely to reach an official agreement on ensuring the same prices for CPC and LIOC fuel, but are likely to reach an understanding on the issue.

Mr. Ramakrishnan said the clause on CPC prices meeting LIOC prices would not be included in the agreement between the government and the LIOC but would remain an unwritten understanding.

Mr. Ramakrishnan also added that they needed the full support of the government and the CPC if they were to sign the agreement, which has not yet been decided upon. Meanwhile, there was speculation that with the signing of the new agreement LIOC would be free to distribute their total sales quantity to the market from Trincomalee, reducing their transportation cost while the CPC will have to distribute from Colombo at a much higher cost.

The Ceylon Petroleum Storage Terminal Ltd. (CPSTL), the company formed to own the entire infrastructure – tankage and pipeline — would now have to carry higher costs as they will distribute only about two thirds of the originally estimated quantities, as LIOC would be distributing its one-third from Trincomalee, trade sources said.

However, Mr. Ramakrishnan said the distribution from Trincomalee would be limited to five per cent.

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