News
Dispute deepens; fuel crisis looms
View(s):- Distributors halt credit sales to state bodies until commission is restored; suspend orders
- CPC says enough fuel to last entire year; meeting with CPC on Tuesday
By Ishu Bandara and Kapila Bandara
Fuel distributors yesterday decided to stop issuing fuel to government institutions, including hospitals, on a credit basis until a dispute over revised commission rates is resolved while queues built up at fuel stations.
Fuel Distributors Association Vice President Kusum Sandanayaka told the Sunday Times nearly 500 shed owners stopped selling fuel on credit to state institutions yesterday in keeping with the decision taken by the association.
The move came as fuel distributors also stopped placing fresh orders for fuel, raising fears that the fuel shortages will become more acute by Monday.
Mr. Sandanayaka said they had been invited by the Ceylon Petroleum Corporation (CPC) to a meeting on Tuesday.
The dispute arose after the CPC reduced the 3% commission given to fuel distributors to nearly 1.7% under its new fuel pricing formula. Distributors claimed that, under the new formula, their profits have been cut by more than 43 percent.
However, CPC Chairman Janaka Rajakaruna dismissed the claim, saying that the distributors had not understood the formula correctly.
Long vehicle queues were witnessed in Colombo and other outstation areas from Friday night when the Fuel Distributors’ Association announced the suspension of new fuel orders in protest against the reduction of their commission payments.
Protesting distributors claimed that their campaign was supported by sheds run by LIOC, Sinopec, and R.M. Park, but the CPC dismissed the claim.
Mr. Rajakaruna claimed that only a limited number of fuel station owners had joined the protest and assured that sufficient fuel was available at both government and corporate fuel stations. He also emphasised that the government had enough fuel to last the entire year and urged the public not to panic over a fuel shortage.
“If any party engages in activities that disrupt the country, the government will not hesitate to take legal action against them to ensure public convenience,” Mr. Rajakaruna told the Sunday Times.
“President Anura Kumara Dissanayake has firmly stated that, as a people-friendly government, it will stop providing commissions to a limited group of individuals from the tax revenue, which should instead be used for the benefit of the entire nation,” the CPC chairman said.
He contested the assertions from dealers that a filling station that sells a minimum of 15 loads (a load is 6,600 litres) can only earn Rs 62,333 a month. Rather, he said, according to CPC calculations, a fuel station selling 15 loads can generate at least Rs 683,415 under the new formula.
In 2022, the national auditor estimated that Rs 4.349 billion had been overpaid in dealer commissions by the CPC as of July 17, 2022, and not recovered.
The dealers insisted this week that the 3% commission was not an income. The 3% cut, with 2% for kerosene, was approved by the CPC at the end of July 2019.
Mr. Rajakaruna also suggested that some have opened filling stations selling 15 loads, benefiting from past political patronage and without any method to know where they are located. “There won’t be any sales when you open up everywhere.”
He said that a filling station that sells 15 loads a month “is a weak shed. It should not be at that level.’’
He explained there are five categories of filling stations—15 loads, and 30, 60, 90, and 120 loads.
The CPC has asked the University of Moratuwa to compile a map for methodically locating filling stations, he said.
A new filling station in a location—a remote area—where there aren’t any others operating within a 15-kilometre radius, is also given an incentive exceeding Rs 100,000, he said.
A dealer selling 30 loads can generate more than Rs 1.3m, he said. Excluding all costs, such a dealer can earn a net profit in excess of Rs 300,000.
A filling station selling 60 loads can generate more than Rs 2.3m minimum, he said. Net profit would be more than Rs 750,000.
One that sells 90 loads can rake in more than Rs 3.2m, and the net profit would surpass Rs 1.2m.
And a dealer selling 120 loads can generate more than Rs 4.1m. If Rs 3.8m were to be deducted as expenditure, including tax, the net profit would exceed Rs 1.6m.
At another time, a dealer claimed that a filling station selling 15 loads could earn Rs 1.1m or Rs 900,000. Excluding costs, the income is Rs 300,000 to Rs 350,000 at this moment. He said this has now been trimmed to Rs 62,500.
Dealers who object to revised commissions announced amid loud cheers that 1,400 shed operators are supporting their decision to stop sales temporarily. They said fuel for Saturday had been paid for and ordered as of 8 am Friday, and they expect shortages Monday.
Sri Lankans have had to pay more for fuel because of the dealer commissions, an audit had revealed earlier.
In 2022, the national auditor determined that the cost of fuel had increased by Rs 10 per litre after the upper limit of dealer commission was removed. The price of petrol Octane 92 and Octane 95 had shot up by Rs. 8.64 and Rs. 11.10, respectively, while the price of Lanka Auto Diesel and Lanka Super Diesel had increased by Rs. 9.27 and Rs. 10.95, respectively.
The dealer sweetener had been raised on Cabinet decision No. 22/0673/522/002 of 23 May 2022. For Octane 92, for example, the commission had been raised to Rs 13.50 per litre, while the actual commission should be Rs 4.86 under a CPC decision. The increase is Rs 8.64 per litre.
The auditor observed that this would undermine the CPC’s sustainability.
The best way to say that you found the home of your dreams is by finding it on Hitad.lk. We have listings for apartments for sale or rent in Sri Lanka, no matter what locale you're looking for! Whether you live in Colombo, Galle, Kandy, Matara, Jaffna and more - we've got them all!