Fuel subsidy running out as CPC continues to sell fuel at a loss

Colombo, June 2 (Daily Mirror) - Despite recent fuel price increases, the Ceylon Petroleum Corporation (CPC) continues to incur substantial financial losses on every litre of fuel sold, CPC Chairman D.J. Rajakaruna said.

The Chairman said that the government has heavily cushioned the public from surging global energy prices, but warned that the financial allocation supporting these subsidies is rapidly running out.

According to Rajakaruna, the government allocated a massive budget of Rs. 57 billion to bear a subsidy of Rs. 100 per litre of diesel and Rs. 20 per litre of petrol. This financial relief was maintained through April and May and will continue into June. However, because this allocated fund will be completely exhausted by the end of June, the government was compelled to increase fuel prices to avoid deeper economic instability.

The crisis is heavily compounded by a staggering foreign exchange drain. The Chairman said that the country's monthly fuel import expenditure spiked dramatically to $522 million last month, compared to earlier months when it was managed around the $100 million to $120 million range. "This massive dollar outflow has hit the foreign exchange market severely. If this continues, it will not only affect fuel prices but will trigger a domino effect across all other goods and services, causing a much more severe blow to the entire economy," he warned, urging the public to minimise their fuel consumption.

Providing a breakdown of the corporation's current cost margins, Rajakaruna explained that the actual cost of a litre of auto diesel stands at Rs. 536, whereas it is being retailed at Rs. 407. This results in a persistent loss of Rs. 29 per litre even after accounting for government support. Similarly, a litre of petrol costs Rs. 494 to import and refine but is being sold at Rs. 434, resulting in a net loss of over Rs. 60 per litre.

To address the situation, the CPC, in collaboration with the Ministry of Digital Infrastructure, is transitioning to a zero-tolerance policy regarding the national fuel QR code system.

While acknowledging that some fuel stations had neglected to use the QR system in the past, Rajakaruna said that the CPC has already increased the commission margins for dealers to accommodate their rising operational costs.

With the new tracking systems in place, the corporation can now digitally monitor exactly how many litres are being pumped via QR codes at 100% of the filling stations island-wide. "Starting this week, we will fully monitor compliance. If any dealer fails to strictly enforce the QR code system for fuel dispensing, the financial incentives and commissions recently granted to them will be slashed immediately," the CPC Chairman said.