• Says spikes in the world market as the reason for upward revision

Hot on the heels of Sri Lanka Podujana Peramuna(SLPP) General Secretary Sagara Kariyawasam criticising Energy Minister Udaya Gammanpila for the fuel price hike and demanding his resignation, the President’s Office justified the decision saying the spikes in the world market warranted it as the main reason.  

The President’s Media Division (PMD) , in a statement, said the Cost of Living Committee, chaired by President Gotabaya Rajapaksa and convened with the participation of Prime Minister Mahinda Rajapaksa and the Ministers in charge of the subject, focused on a number of main reasons for the need to increase fuel prices.  
The statement said one of the main reasons for this is the continuous rise in global crude oil prices over the past few months. At present, the price of a barrel of crude oil is over US$ 70, and market trends indicate that it will continue to rise.  “Sri Lanka has become a country that not only spends a large amount of foreign exchange for fuel imports, but also a country where its transport services, power generation and the function of some of the factories are based on these imports. In 2019 alone, the foreign exchange spent on oil imports was US$ 3,677 million. The cost spent for fuel imports was reduced to US$ 2,325 million in 2020 due to the ban on vehicle imports and the reduction in international oil prices to US$ 45.57 in 2020 from the previous price of US$ 68.80 in 2019. However, the price of a crude oil barrel in 2021 has exceeded US$ 70. Therefore, although the ban on vehicle imports was maintained, the expenditure from the foreign exchange earnings for petroleum imports would be around US$ 4,000 million. This amount is close to 1/3 of the total foreign exchange earned from the exports.  The import-dependent pattern of consumption which includes imports of seeds, fertilizers, food, pharmaceuticals and vaccines, must be transformed into a production-based pattern of consumption.  In addition to spending foreign exchange, the Ceylon Petroleum Corporation (CPC) has been a loss-making institution, relying on loans obtained from the Bank of Ceylon and the People’s Bank annually. The amount to be paid to the two banks as loans is Rs. 652 billion. As the Ceylon Electricity Board (CEB) has also to repay nearly Rs. 85 billion in loans to the two banks, the Treasury has issued bonds on loans given by the state banks and it has to pay a higher interest on the loans as well.