Govt. defends fuel prices

• Insists low prices will not last and global vulnerabilities temporary, Chinese growth unlikely to significantly decline
• PM says SL needs to be avoid fluctuations, confident of managing growth, says public to benefit from land titles 

By Ashwin Hemmathagama – Our Lobby Correspondent

Prime Minister Ranil Wickremesinghe yesterday assured Parliament the economy will be managed prudently under his command despite temporary global issues. He also rejected the opposition charges of the CPC making an extensive profit by selling fuel at a high price. Listing economic priorities, the Prime Minister insisted low global fuel prices are unlikely to be long term, creating the need for costs to be managed and insisted public needs will be met through other policies.

“We don’t expect the current trend of reducing fuel prices to continue for a few more years. On the other hand, we fear the amount of money we receive from the Middle East would reduce. The Euro Zone economy is yet to reach the levels of stability we expect as a result of the Bank of England deciding to maintain interest rates at current levels. We don’t expect the US Federal Reserves to further increase the rates. These were the reasons the IMF agreed to make the Chinese renminbi a reserve currency with special drawing rights. We were looking at facing this unstable situation, having met Christine Lagarde and Joseph Stiglitz. The Chinese economic crisis will not last for long and all these issues are short term,” said the Prime Minister.

However, Chief Opposition Whip MP Anura Dissanayaka suggested the Prime Minster meet local people instead of meeting global leaders in finding solutions for domestic matters. “It is good to see that you have met the head of IMF along with several other leading businessmen in the world. But it is suggested you meet Ranbanda of Embilipitiya and Punchimenike of Polonnaruwa to discuss their issues as well. They have burning issues in the absence of inadequate income. The fuel price has serious impact on their day-to-day lives,” said JVP MP Dissanayaka.

In response the PM prioritised the issues. “Yes: I will meet Rambanda and Punchimenike. But beforehand I met Priyantha, Kumudu, and Wasantha. They wanted to know how we will provide them employment opportunities, which is the current priority. We need to create 1 million jobs. We will have the largest harvest this season. We are getting ready to manage it,” responded PM Wickremesinghe.

Bringing up the issue of the fuel price formula in the Parliament forcing the Government the benefit of reduced oil prices in the international market to local consumers, MP Dissanayake said: “Crude oil prices are declining drastically. The highest oil price was reported between 23rd February 2013 and 17th September 2014. But since June 2014 the prices started to come down. However, the benefits of the reducing prices were not passed to the local consumers. People have a right to know the taxes imposed on oil prices imported to Sri Lanka. As a result, the public continued to rally forcing the Government to introduce a fuel pricing formula. Government has failed to introduce the formula. People believe a fuel price formula could bring down the prices drastically.

“CPC imports crude oil based on the Singapore Platts Index. In June 2014 a barrel of crude oil was priced at $108.06 and the 92 Octane petrol was $120.39. Based on these and the prevailed currency rate of Rs.130/- per  $1, the estimated landing cost per litre was Rs.98.42. A diesel barrel was at $ 121.24 and the landing cost of a litre was Rs.99.10. However, based on the other taxes and costs a petrol litre was sold for Rs.162/- and diesel at Rs.121/-.

Since January this year according to Singapore Platts Index the price of a barrel of Oman crude oil stood at $26.81, the a 92 Octane petrol barrel was $46.89, while a barrel of diesel was $35.18. Based on the prevailing currency rate of Rs.140/- per dollar, the landing cost of a litre of petrol will be Rs.42.76 and a litre of diesel Rs.32.08. Even if an operational cost of Rs.10/- was added per litre the consumers still could purchase a litre of petrol for Rs.52/- and diesel for Rs.42/-. However, a litre of petrol is sold at Rs.117/- while diesel is priced at Rs.95/- today,” he said charging the Government for making an additional profit of Rs.65/- per litre of petrol and Rs.53/- from a litre of diesel. IOC sells 20 million litres of diesel per month and earns an additional profit of Rs.460 million.

“What is the reason to increase the price of a litre of petrol by 125% or Rs.65/- and diesel by 126% or Rs.53/-? What is the mechanism used to calculate the selling price? When will you pass the benefit of the reduced oil prices in the world market? When will you introduce the fuel price formula? Let us know the net profits CPC earn from a litre of petrol and diesel,” challenged MP Dissanayaka.