Now, repairs add to high cost of fuel

Major repairs in the Ceylon Petroleum Corporation’s (CPC) refinery have contributed to the soaring fuel prices in the country, chairman Asantha De Mel has revealed. The CPC which at present suffers a loss of about Rs. 640 million a month will lose about Rs. One billion in earnings when the refinery shuts down for about 2 months for effecting repairs, The Sunday times learns. In addition the repairs which will be carried out this month and the next, have been estimated to cost Rs. 300 million.

In an apparent move to cover some of these losses the CPC increased the price of petrol to Rs. 127 and diesel to Rs. 80, at the beginning of this year, Mr. De Mel said. He said in addition to the CPC suffering heavy losses over the past few months due to insufficient pricing of fuel, the repairs to the refinery and the import of the more expensive refined oil instead of crude oil have added to the losses.

Mr. De Mel said that the 2008 budget proposal of reducing the VAT on petrol from 15% to 5% had mitigated some of the financial burden faced by the CPC. In his budget proposals President Rajapaksa had also said that if the reduction of VAT failed to affect fuel prices in terms of world market prices, the excise duty on petrol would be completely removed. However the CPC chairman said despite the CPC having increased the price of petrol by Rs.10 this month, no action so far had been taken by the government to waive the excise duty.

Meanwhile Petroleum Minister A.H. M. Fowzie told the Sunday Times that the increased consumption of diesel was also burdening the CPC further as it was sold at a minimal rate. He said 145 million litres of diesel is consumed monthly in comparison to 40 million litres of petrol.

The burden of kerosene subsidies for Samurdhi beneficiaries and low income families have also been controlled through high petrol prices as well as revenue from the refinery. However, Minister Fowzie expects fuel prices to reduce by the first week of March as the government’s VAT reductions and falling world market prices would enable the CPC to reduce the prices.

Meanwhile, the CPC’s gas venture has taken another turn as Laugfs Gas Pvt Ltd (LGPL) has taken their objections to the Supreme Court to prevent the CPC from issuing tenders for the project.

LGPLchairman, W.K.H. Wegapitiya said that the Supreme Court had issued an enjoining order and that the case would be taken up on February 18. “We have not had any further communication with the President on this issue,” he said.

Minister Fowzie said that the CPC was calling for tenders for the import of 45,000 cylinders and that it produced 10% of the country’s gas requirements.“We are confident that we will be able to sell gas at a cheaper rate than any other competitor in the Sri Lankan market but we are facing some objections from LGPL,” he said.