Wednesday, May 29, 2024

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Fuel price formula, power cuts coming soon with no dollars more

Sri Lanka is to experience power cuts, fuel price hike, food shortage, coupon systems and rationing of essential commodities with the worsening of dollar situation setting the stage ready for the repetition of 1970 closed economy plight for the people, several economic experts warned.

The line of cars stretches for blocks. Fuel pumps run dry, food shortage, coupon systems and rationing of essential food items and clothing with the worsening of dollar situation.

This current economic situation incited alarm that an eminent economic expert said was worse than 1970 debacle     

The Energy ministry has no option other than imposing power cuts within two weeks while the Ceylon Petroleum Corporation pressurizes the government to introduce fuel price hike.

However Energy Minister Udaya Gammanpila has ruled out fuel price hike but suggested to the cabinet of ministers to allow him to introduce a cost reflective price formula for fuel which was already devised by the ministry.

 Despite all these difficulties, the CPC has urged the Energy Ministry to negotiate for US$ 1billion loan from China, Singapore or West Asian countries as a patch up solution.   .

This attempt is being made at a time where the 180-day credit facility from the Petro-China Company is expiring this month prompting it to call for fresh tenders.

Adding fuel to the fire, the CPC  made every effort to find  US $ 700 million  to settle its debt  obtained for fuel purchase by the end of this month ,Energy Ministry Secretary K.D.R. Olga disclosed. .

She said it was the responsibility of the Central Bank to provide to the banking system $ 700 million to be paid to the Bank of Ceylon and the People’s Bank.

According to Energy Ministry secretary  the $ 330 million due to be paid for the fuel purchased subsequent to opening LCs in June-July 2021 is due to mature by the end of this month. 

Another $ 350-400 million has to be paid by the CPC at the end of this month for fuel purchases for February. The total is about $ 700 million.

Sri Lanka’s banks are being asked to share payments for fuel and essential items like food, Central Bank Governor Nivard Cabraal said as lack of dollars at banks delayed clearing of letters of credit for fuel.

Usually state banks opened letters of credit for fuel imported by state-run Ceylon Petroleum Corporation.Top state bureaucrats had previously stopped state agencies from dealing with private banks.

Governor Cabraal said private banks will also now have to pay for fuel imports, not just state banks.

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