By: Isuru Parakrama
November 05, Colombo (LNW): The Ceylon Petroleum Corporation (CEYPETCO) has announced plans to overhaul the current commission structure for fuel distributors, opting to implement a price formula tailored to local conditions.
CEYPETCO Chairman D.J.A.S. De S Rajakaruna revealed this shift at a briefing yesterday (04), emphasising the need for transparency and fairness in the fuel supply network.
Rajakaruna explained that the CEYPETCO has historically linked distributor commissions to global oil prices, a model that has increasingly led to disproportionate profits for distributors, especially during recent fluctuations in the global oil market.
Until now, distributors earned a 2.25 per cent commission based on global oil prices, with an additional 0.5 percent increase implemented in 2018 due to economic challenges.
This led to a significant rise in distributor earnings; for instance, in 2022, distributors received Rs. 14 per litre of octane 92 petrol and Rs. 13.80 per litre of diesel.
The chairman highlighted that the Auditor General’s Office reported substantial losses from this commission model, noting that in 2022 alone, the CEYPETCO faced a shortfall of Rs. 35 billion due to the temporary commission increase.
Consequently, the CEYPETCO’s Board of Directors has determined that the global oil market should no longer influence distributor commissions.
Instead, the CEYPETCO will establish a formula rooted in local economic conditions, ensuring a stable and fair return for distributors without burdening public funds.
An expert committee has been appointed to develop this new pricing formula. In the interim, the CEYPETCO has proposed a provisional allowance of Rs. 6 per litre for distributors until the formula is finalised.
However, distributors have sought a court injunction against this interim rate, which currently sees them receiving Rs. 8.49 per litre for diesel and Rs. 9.33 per litre for petrol.
Beyond revising distributor commissions, Rajakaruna criticised prior government policies that, in his view, weakened the CEYPETCO’s autonomy and market share.
Agreements with previous administrations have reportedly forced the CEYPETCO to relinquish profitable fuel stations to competing entities, reducing its sales by 50 per cent.
Furthermore, CEYPETCO equipment has, in some cases, been transferred to private companies, including a licence issued to a private company for supplying aircraft fuel, still operating on CEYPETCO infrastructure.
Despite these setbacks, Rajakaruna expressed optimism, asserting that the Corporation’s fuel, lubricants, and agro divisions would eventually regain stability and profitability.
He assured that the new commission formula, along with an emphasis on transparency, would restore public trust in the CEYPETCO’s operations.
Managing Director Dr. Mayura Neththikumarage also supported these efforts during the press briefing, highlighting the need for continued reform to safeguard the Corporation’s future.
