• Requests Cabinet to approve price hike for petrol
• New prices yet to be decided
• Prevailing forex crisis may create fuel shortage in Jan., Feb. 2022

By Yakuta Dawood The Ceylon Petroleum Corporation (CPC) has sent a proposal to the Cabinet of Ministers requesting the latter to grant a price hike on petrol as a short-term measure to address the deteriorating financial position of the state-owned institution, The Sunday Morning Business reliably learnt.  Speaking to us, a senior official from the CPC who wished to remain anonymous stated that the request to the Cabinet was presented due to the accumulated debt owed to two state banks, in addition to not having money to pay for suppliers. “All suppliers almost always ask for a pre-payment before unloading, and without it, they are not allowed to unload the cargo. We can keep away the diesel prices as it would impact the consumers, but petrol? We should think twice. We are not asking for a high price hike, but at least increase the cost in accordance with a respective price mechanism,” the official highlighted. Speaking further, the official said that the final decision will be made by the Cabinet of Ministers and Energy Minister Udaya Gammanpila. However, the official did not disclose the specific amount of the proposed petrol price hike. Moreover, it was also revealed by the official that if the present matter is prolonged, Sri Lanka will face a severe crisis in terms of supplying fuel to the country. “We will face a severe crisis, not in December but maybe by the end of January or February 2022. This is because the country does not have dollars and we have accumulated outstanding debt to state banks,” the official added.  However, attempts to reach Minister Gammanpila and the Energy Ministry to know their stance on this proposal presented by the CPC proved futile. Accordingly, data from the state petroleum supplier’s financial division revealed that the CPC owed a total of $ 3.3 billion to the two-state banks; People’s Bank (PB) and Bank of Ceylon (BOC), which had accumulated since June last year. CPC had a total of Rs. 150 billion in its reserves as of September 2021. Further, official statistics show that the CPC’s borrowings from the banking sector had risen by Rs. 74.1 billion to Rs. 381.8 billion in 2020 – or 2.5% of gross domestic product (GDP) – with a large portion in foreign exchange due to policy errors. Nevertheless, after maintaining local fuel prices for 21 months, the Government revised the CPC prices in June this year. Accordingly, the price of one litre of 92 octane petrol was increased by Rs. 20 to Rs. 157, 95 octane petrol by Rs. 23 to Rs. 184, diesel by Rs. 12 to Rs. 111, super diesel by Rs. 12 to Rs. 144, and kerosene by Rs. 7 to Rs. 77. Speaking with us about this in October 2021, Energy Ministry Secretary K.D.R. Olga stated that the CPC was suffering significant losses at the moment, as the per-barrel cost was above $‌ ‌80‌ in comparison to the $‌ ‌70 per barrel rate when local oil prices were last revised. “Sri Lanka is facing a twofold burden; one due to surging global oil prices and another due to the rupee depreciation. Therefore, discussions have begun with the Finance Ministry to find an appropriate mechanism to resolve the issue. Perhaps the prices could be revised again, but the decision is not yet finalised,” Olga explained. According to her, the CPC was incurring a loss of Rs. 20 per litre on products such as Lanka auto diesel and Lanka super diesel in the month of October. Meanwhile, the Lanka Indian Oil Company (LIOC) has increased its retail selling prices for both diesel (Lanka auto diesel) and petrol (LP 92) by Rs. 5 per litre, each with effect from 21 October due to huge losses on sales of both the products. According to the data presented by the LIOC, the prices of Lanka super diesel and LP 95 have been kept unchanged. The losses are around Rs. 40 per litre on the sale of diesel, and Rs. 20 per litre on the sale of petrol at the current international prices.