October 01, Colombo (LNW): The Government has approved a Rs. 41 billion subsidy package to ease the impact of rising international oil prices, with Rs. 70 being allocated for every litre of diesel sold, Energy Minister Anura Karunathilaka said.
The three-month intervention is designed to limit the increase in global fuel costs passed on to consumers while also providing some relief to fuel distribution companies facing substantial losses under the existing pricing mechanism.
Karunathilaka said several fuel distributors had reported significant losses on diesel sales as international prices climbed. The losses reported by individual companies ranged from Rs. 120 to Rs. 247 per litre, with figures of Rs. 135, Rs. 247, Rs. 192 and Rs. 120 cited by different distributors.
Under the Cabinet-approved scheme, the Government will release the subsidy in three instalments. Rs. 15 billion has been earmarked for October, followed by Rs. 13.5 billion in November and Rs. 12.5 billion in December.
The amount payable to each distributor will be determined according to the volume of diesel sold by the company during the relevant month.
However, the Minister noted that the Rs. 70 per litre intervention would not completely compensate distributors for the losses they have reported. Fuel companies are therefore expected to continue bearing a portion of the additional cost resulting from the surge in international prices.
Karunathilaka said the subsidy was introduced to prevent a sudden increase in domestic fuel prices and to reduce pressure across the fuel distribution network.
The Minister also disclosed that some distributors had begun limiting diesel supplies, increasing the strain on the Ceylon Petroleum Corporation (CPC) to meet market demand.
Despite the additional financial pressure on the CPC, Karunathilaka said he expected the state-owned petroleum corporation to remain financially stable through the end of the year. He pointed to income generated from its broader operations, including petrol and diesel sales, aviation fuel and refinery activities, as factors that could help absorb the additional expenditure.
The Government is also due to reassess domestic fuel prices at the end of the month. Karunathilaka said the review would take into account the effect of the newly approved subsidy, with any decision on revised petrol and diesel prices expected to reflect the changing international market conditions.