More fuel hikes soon, CoL soars

Hard on the heels of Friday’s fuel price hike, Ceylon Petroleum Corporation (CPC) Chairman Asantha de Mel warned yesterday of a further increase, raising fears of a chain reaction on a variety of essential consumer goods. Against the backdrop of Friday’s increase, electricity tariffs, bus and rail fares, LP gas, milk foods are among items that are up for immediate price revision. A further fuel price hike will only mean a further upward revision, officials warned.

The increase in fuel prices, the third in just six weeks, is the result of Sri Lanka’s economy taking a severe beating in the light of an escalating separatist war and drop in Government revenue. The rupee equivalent to the US dollar has been rapidly depreciating. It stood at Rs 111 to a US dollar yesterday and financial analysts forecast a further drop in the coming weeks.

At midnight Friday, the CPC raised by a rupee per litre for petrol (now Rs 106), two rupees per litre on diesel (now Rs 67 per litre) and a rupee per litre for kerosene (now Rs 51 per litre). “If we were to sell at old prices, we would suffer a loss of nearly two billion rupees,” Mr. de Mel told The Sunday Times. He said the CPC expected further price increases in the world market. That meant the CPC would have to pay more rupees to a dollar to procure them.

The state-owned Ceylon Electricity Board (CEB) had already recommended an increase in electricity tariffs. Its General Manager D.R. Pulleperuma said that in the light of Friday’s fuel price hike, the new rates were now being worked out for Government approval. He said it was up to the Government to determine whether the price increase should be passed down to the consumer or the CEB should be given a subsidy. He added “sixty per cent of our fuel is from external sources like diesel.”

Transport Ministry Secretary Nihal Somaweera said yesterday that proposals were already before Government to increase rail fares. However, he said it would not come immediately and may take until next year. However, other sources said a further fuel price increase would place an inevitable burden on the Railway and compel it to consider a price revision. An appropriate bus fare will be formulated soon, probably within weeks, Gemunu Wijeratne, President of the Private Bus Owners Association said.

One of the main LP gas distributors, Shell Gas, is still engaged in a tussle with the Government after refusing to pay heed to an officially approved rate from Rs 966 to Rs 988 per 12.5 kilogramme cylinder. Instead, it wants to raise the price to Rs 1,121 and a further increase may be demanded, officials warned, if prices of fuel were increased again.

Laugfs gas, another major distributor, has also sought a price revision from Rs 940 to Rs 1,100 but the Government has allowed only a rise up to Rs 960. The companies claimed they were incurring losses. But Dr. R.M.K. Ratnayake, Secretary to the Ministry of Trade and Consumer Affairs, said the Government would soon consider all contributory factors and re-calculate a suitable amount by which LP gas should be increased.

Milk food companies that import stocks have also applied to the Consumer Affairs Authority (CAA) for an immediate increase. CAA Chairman, Sarath Wijesinghe declined to comment. Trade and Commerce Minister Bandula Gunawardena had asked him not to make comments to the media.

Mr. Gunawardena refused to believe price increases were affecting the public. Yesterday he blamed the media for the price increases saying they had been “blown out of proportion by media.” He argued that the Cost of Living Index from January to April this year had dropped from 20.5 per cent to 16.3 per cent. Before he took over his portfolio, there were only four items listed as essential but now there were 16. Hence, the Trade and Commerce Minister believed price controls applied and consumers were benefiting from them.

“Only 30 per cent of households use LP Gas. A raise of Rs 100 will not affect the cost of living,” Mr. Gunawardena told The Sunday Times. He claimed, “when comparing these increases with price reductions in vegetables and other items, the increase is insignificant.”