By: Staff Writer
September 24, Colombo (LNW): Sri Lanka’s petroleum sector may be preparing for greater storage capacity, improved pipelines and refinery expansion, but a potentially serious weakness is emerging at the very end of the fuel supply chain—the filling-station dealers who sell petroleum directly to consumers.
Ceylon Petroleum Corporation (CPC) dealers say the reduction in their remuneration has created an increasingly difficult operating environment, raising questions about whether the existing retail distribution model can remain financially sustainable.
For years, CPC dealers received a discount equivalent to approximately 3% of the retail selling price. That arrangement changed from March 1, 2025, when the percentage-based system was replaced by a volume-based payment of roughly Rs.8 per litre.
With petrol selling at approximately Rs.400 a litre, the former 3% arrangement would have generated around Rs.12 per litre. Under the present system, the dealer receives approximately Rs.8, equivalent to about 2% of the retail price.
The situation becomes more difficult because dealers are required to pay 18% VAT on this margin. According to the figures provided, the amount effectively retained is therefore only around 1.68% of the retail selling price.
This represents an effective reduction of roughly 40% compared with the former margin.
The dealers, however, are not simply collecting commissions. They must finance employees’ salaries and EPF contributions, insurance, electricity, water and telephone bills, property rates, environmental and fire-safety requirements, trade licences, equipment maintenance, building repairs and other regulatory and operational expenses.
The cost of maintaining modern fuel dispensers has also increased substantially. A critical electronic motherboard for a fuel pump can reportedly cost close to Rs.200,000. For a medium-volume filling station, a single major equipment failure could consume a substantial portion of monthly earnings.
Dealers also face an apparent competitive disadvantage. Foreign operators that entered Sri Lanka’s retail petroleum market reportedly continue to provide dealers with a 3% margin and, in some cases, undertake maintenance of pumps and equipment supplied by them.
CPC’s arrangements are different: when CPC undertakes repairs requested by dealers, the dealer may be charged for the service.
The consequences are already visible, according to the information provided. Some CPC-affiliated filling stations have reportedly struggled to finance even routine maintenance and repainting. If this trend continues, deterioration of the dealer network could eventually become a supply-chain issue rather than merely a commercial dispute.
There is, however, a straightforward way to test the economics.
CPC could select representative filling stations in each district and operate them for one year using its own surplus employees. The stations could be run exclusively under the existing Rs.8-per-litre margin, with every expense transparently recorded.
If CPC can demonstrate profitability under those conditions, the results would provide evidence supporting the existing dealer-margin structure. If the stations generate losses, the experiment would provide equally important evidence that the current remuneration may not adequately cover genuine operating costs.
This would transform an increasingly contentious debate into an evidence-based assessment.
With nearly 500 company-owned filling stations also reportedly facing difficult conditions amid Middle East-related geopolitical disruptions, CPC’s challenge is no longer confined to crude prices and dollar payments.The sustainability of the entire retail network now requires closer financial scrutiny.