CPC assures fuel supply amid distributors’ protest over 3% commission cut

• CPC denies fuel shortage fears, blames panic buying for long queues
• Corporation Chief D.J. Rajakaruna calls 3% margin unlawful as it was linked to fuel price thresholds, but escalated significantly amid economic crisis prices surge
• Reveals excess payments 
• of Rs. 35.4 b due to outdated commission structure
• Says new formula based on operational costs replaces margin
• Govt. insists no fuel crisis will be allowed to develop

The Ceylon Petroleum Corporation (CPC) yesterday moved to quell public fears of an imminent fuel shortage, even as distributors stage protests over a controversial decision to abolish the 3% commission paid to distributors.

CPC Chairman D.J. Rajakaruna firmly assured the public that fuel distribution was proceeding as usual and that the country would not face a shortage unless panic buying disrupted supply chains. 

However, the crisis deepened as fuel dealers, angered by the decision to abolish the commission from 1 March, began halting fuel distribution, triggering long queues at filling stations.

At the heart of the controversy is a long-standing payment dispute. Rajakaruna said the CPC had been granting distributors a 3% margin via a circular issued since 10 March 2022, which he now claims was unlawful. 

He said the commission, initially linked to fuel price thresholds, escalated significantly during the economic crisis when fuel prices surged. “These people were entitled to a 3% discount. But it is implemented as per the circular issued on 10 March 2022. According to that, the current amount paid is unlawful. It is clearly stated that if the price of diesel increases beyond Rs. 121, then the corresponding 3% amount is paid. For petrol, it is Rs. 162. If so, those people should get 3.63% as a discount on a litre of petrol. Diesel should get 4.86%, but if they calculate it at 3% last month, they will get Rs. 8.52; Octane 92 petrol will get Rs. 9.14, and Octane 95 petrol and super diesel will get even more,” he explained.

As a result, dealers continued to receive inflated margins despite the CPC’s repeated attempts to correct the anomaly, which were repeatedly blocked in Court.

“In 2022, amid the height of the economic crisis, the price of fuel increased unusually. After that price increase, when calculated at 3%, it went to Rs. 14-15. But according to the 2022 circular, those guys should only get 3% if the price of diesel increases by more than Rs. 121. That was a mistake made by the CPC. If our CPC’s system had been fixed, the dealers would not have received more than 3.63%,” he pointed out. The dispute came to a head when the CPC announced that the 3% commission would be abolished from 1 March 2025, with a new payment formula introduced instead.

Rajakaruna explained that this new formula would calculate distributor margins based on operational expenses such as electricity, water, and other overhead costs. 

He described the move as a ‘fairer system,’ revealing that distributors had already received Rs. 35.4 billion in excess payments due to the outdated margin structure.

Nevertheless, fuel dealers saw it differently, arguing that they had been providing fuel on credit to State institutions and hospitals for months, straining their finances.

In response to the commission removal, a section of fuel dealers ceased placing orders or hoarded stocks to create an artificial demand leading to panic buying among motorists.

Although the Fuel Distributors’ Association of Sri Lanka last Friday warned that fuel stations would not place further orders, the CPC Chairman confirmed that on Saturday morning a total of 2,924 orders had been placed.

“By Saturday morning, 1,696 orders had come from CPC dealers – 471 from Lanka IOC, 391 from Sinopec dealers, and 366 from RM Park Shell dealers,” Rajakaruna said, adding that not all dealers were involved in the protest and the Corporation was still processing orders.

He said that a special provision was made to accept orders beyond the usual Saturday 7 a.m. cut-off, as many fuel stations reported an unexpected surge in demand due to panic buying.

Separately, Economic Development Deputy Minister Prof. Anil Jayantha Fernando on Saturday told the House that the long queues formed at fuel stations countrywide is due to the Distributors’ Association refusing to accept a new commission formula proposed by the Government.

He alleged that certain groups are attempting to create an artificial crisis. 

Prof. Fernando, however, assured that the Government will not provide any room to create a fuel shortage or a crisis.