Treasury and CPC weigh options on fuel prices as Rs. 57 Bn fuel allocation nears exhaustion

Colombo, June 15 (Daily Mirror) - The government is considering maintaining current domestic fuel prices without implementing an increase, even after the existing state subsidy concludes, provided that the current downward trend in the global oil market remains steady.

The government is closely monitoring international developments and fuel price fluctuations before deciding on subsidies for local fuel prices, officials said.

The assurance comes amid concerns over the future of the fuel relief programme introduced by the government earlier this year. The programme, which provides a subsidy of Rs. 100 per litre on Auto Diesel and Rs. 20 per litre on Petrol, was initially funded through an allocation of Rs. 57 billion for a three-month period. While the subsidy was expected to conclude at the end of June, authorities clarified that its continuation will depend on the utilization of the allocated funds rather than a fixed deadline.

Ceylon Petroleum Corporation (CPC) Managing Director Mayura Neththikumara said that the fuel relief measures will remain in place until the entire Rs. 57 billion allocation is exhausted. He said that the subsidy scheme will not automatically expire at the end of the month, as widely believed, but will continue based on the availability of the designated funds.

He said the government must inform the CPC whether the subsidy will be continued or not.

Neththikumara said the downward trend in international oil prices has created favourable conditions for maintaining current fuel rates.

He said that the price of a barrel of diesel had fallen to $125. This downward trend in the global market suggests that there may be room to maintain current domestic fuel pricing without relying heavily on additional state subsidies, provided that these lower global prices remain stable over the long term.

However, the Managing Director said that pricing adjustments cannot be made based on short-term market changes. He said that global oil prices must remain at these lower levels consistently on an average basis to justify any permanent policy adjustments.

Currently, motorists in Sri Lanka pay Rs. 434 per litre for Lanka Petrol 92 Octane, while Lanka Auto Diesel stands at Rs. 407 per litre. For premium options, the prices are maintained at Rs. 495 per litre for Lanka Petrol 95 Octane and Rs. 478 per litre for Lanka Super Diesel.

"Since it has dropped to USD 125 by last Friday, we can generally provide it around this current price. But that has to be an average. If that price level remains continuous, it might be possible to offer it at current rate even without the subsidy," he said.

Ultimately, any decision regarding the extension, modification, or removal of fuel subsidies will be determined and directed by the government based on these sustained market trends.