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Pricing formula for LPG in the making

30 Apr 2022

  • Treasury confirms commencement of discussions
  • Says a fuel formula similar to Mangala’s is being discussed  
By Yakuta Dawood  The Treasury is currently in discussions to implement a pricing formula for Liquefied Petroleum Gas (LPG) that would benefit both manufacturers and the clients, The Sunday Morning Business learns.  A senior Treasury official, who wished to remain anonymous, confirmed to The Sunday Morning Business that discussions had begun and were currently ongoing at the Ministry regarding implementing such a mechanism.   However, the official said that since the discussions were at the initial stages, there was no confirmation on whether it would be implemented and refused to divulge further information on this subject.  Simultaneously, negotiations are in progress to formulate a fuel pricing formula that would reflect global prices in the domestic market.  When asked whether the fuel pricing formula would be the same as the formula previously implemented by former MP Mangala Samaraweera, the official acknowledged that it would not be entirely similar as changes may take place in the pricing mechanism.  However, the official said the decision was not yet finalised.  Minister of Power and Energy Kanchana Wijesekera, in his first address to the Parliament on 19 April, announced that a common fuel pricing formula for Lanka IOC and the Ceylon Petroleum Corporation (CPC) would be introduced in the near future. Speaking on the recent fuel price hike by the CPC after Lanka IOC’s move, Wijesekera said the fuel prices had been revised to minimise the daily loss of Rs. 1.6 billion incurred by the corporation. Minister Wijesekera tweeted on his official account that the Energy Ministry would give priority to procuring fuel in a timely manner, making fuel widely available, and introducing a fuel pricing formula. With regard to the Ministry of Power, priorities would be to make adequate fuel available for power generation, restore uninterrupted power supply, speed up work on expansion projects and renewable energy, implement a cost formula for power generation, utilise natural resources, and expand grid capacity, he added. “No matter how tough or difficult the job and the decisions are, my intention will be to make the right decisions,” Minister Wijesekera further said, adding that he hoped to receive the support of anyone who could contribute to rectify the power and energy crisis we face today and to implement a solid plan for the future. Meanwhile, Samagi Jana Balawegaya (SJB) MP Harsha de Silva in February explained why former MP Mangala Samaraweera introduced a fuel pricing formula.  “When Mangala proposed his fuel pricing formula people laughed at him. If this pricing formula was used back in April 2020, when the price of a barrel of crude oil was almost at $ 0, the country and the consumer would have benefited. When the price of a barrel of crude oil dropped, the price in Sri Lanka did not drop much. The Government had a fixed rate. This was not beneficial to the people nor the Government,” said de Silva. De Silva further explained that the implementation of a fuel pricing formula would benefit the consumer when the global price of fuel drops, and also benefit the Government when the price of a barrel of crude oil fluctuates. “When the price of a barrel of crude oil drops, the consumer still pays a certain amount but it will be a reasonable amount. Likewise, when the price increases, the Government manages to impose a tax on the consumer for fuel and this will be regulated with a capping bar. With a fuel pricing formula, both parties benefit,” he added. Meanwhile, Litro Gas announced an LP gas price increase earlier this week. Accordingly, Litro stated that the price of a 12.5 kg cylinder would be increased to Rs. 5,175.


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