Fuel price reduction: Relief for citizens amid economic recovery
Sri Lanka’s new administration, led by President Anura Kumara Dissanayake, has lowered fuel prices by more than Rs. 20 just a week after taking office.
This reduction is notably lower than the International Monetary Fund’s (IMF) cost-reflective price formula.
While IMF-backed pricing aims to reflect actual costs, it can put significant pressure on businesses and communities still grappling with economic recovery.
The ideal solution would be a competitive market, but Sri Lanka currently faces the challenge of balancing cost-reflective pricing with immediate public relief, several economic experts explained.
During his election campaign, President Dissanayake’s National People’s Power (NPP) criticised the previous government for excessive fuel taxes and allegedly corrupt deals that inflated prices.
Instead of following the IMF-recommended fuel pricing formula, the new administration based its adjustments on estimates from the Ceylon Petroleum Corporation (CPC). Cabinet spokesman Vijitha Herath assured the public that prices would gradually be reduced in a way that supports economic recovery, warning against drastic cuts, such as a Rs. 100 reduction, which could destabilise the economy.
The government expects the fuel price drop to benefit the public by reducing bus and three-wheeler fares and lowering manufacturing costs.
However, CPC Chairman D.J. Karunarathne clarified that the recent revision followed the existing price formula and that efforts are underway to improve the formula for even greater public concessions.
He added that a regulatory commission will be established to ensure transparent decision-making regarding fuel price adjustments. Currently, no such regulatory body oversees petroleum pricing, with the Public Utilities Commission limited to electricity regulation.
The CPC also assured that there will be no fuel shortages until next April, having placed all necessary fuel orders.
Plans are being made to maintain sufficient fuel stocks on a weekly basis. The CPC aims to enhance its refinery sector to ensure a more efficient fuel supply.
However Mr. Karunarathne emphasised that the new government cannot offer large concessions for fuel imported by private companies and that a gradual reduction approach is more sustainable.
The reduction has been widely welcomed, offering immediate relief to consumers and easing transportation costs across the country.
The government’s approach contrasts with earlier practices, where fuel and electricity were sold below cost, leading to financial losses that were ultimately covered by taxpayers.
By easing the burden on fuel consumers while carefully managing the country’s economic recovery, the new administration aims to strike a balance between immediate relief and long-term fiscal responsibility.
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