Though the government has reduced the price of petrol by Rs. 35 during the past two months, Sri Lanka’s retail price of petrol still remains the highest in South Asia, while world market price has dropped by a US$ 100 per barrel.
With last week’s reduction of Rs. 20 a litre, the petrol price in Sri Lanka is now Rs. 122 in contrast to Sri Lankan Rs. 100 in India, Rs. 80 in Pakistan, Bhutan Rs. 95, the Maldives Rs. 73, Nepal and Bangladesh Rs. 120.
The Ceylon Petroleum Corporation (CPC) and the Ministry of Petroleum claim that the heavy subsidy on diesel is the main reason why the price of petrol cannot be reduced further. However, economic analysts point out that diesel is sold in Sri Lanka at Rs. 80 a litre with only landlocked Nepal and Afghanistan selling at the same price.
India, Bangladesh and the Maldives sell diesel at around Rs. 75 a litre while Pakistan sells at less than Rs. 70 and Bhutan at Rs. 45.
The analysts point out that the domestic fuel price increased by 35 percent when the world market prices rose by 50 percent from November 2007 to July this year. But when world market prices fell by 70 percent from August this year, the Sri Lankan price was reduced by only around 24 percent.
The CPC also claims that it cannot further reduce fuel prices because state institutions like the Ceylon Electricity Board (CEB), Sri Lanka Railways and the armed forces owed the CPC about Rs, 58 billion.
The CEB which owes the CPC around Rs. 42 billion claimed that with the falling oil prices it would be able to reduce the debt to the CPC by around Rs. 20 to Rs.30 billion within a year.
Power and Energy Ministry Secretary M.M.C. Ferdinando said the price of the heavy fuel bought by the CEB had reduced from Rs. 76 a litre to Rs. 45 and this had reduced the CEB fuel bill by around Rs. 18 billion a year.
He said that around Rs.118 billion of the CEB’s annual revenue of Rs. 125 billion was spent on fuel, leaving a small portion of the revenue for salaries and maintenance.
However, with the huge decline in world oil prices, the CEB hoped to reduce its losses and improve its overall performance. | 
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