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Wednesday, 11 March 2020 03:09 - - {{hitsCtrl.values.hits}}
By Shailendree Wickrama Adittiya
Power and Energy Minister Mahinda Amaraweera will present a Cabinet paper today proposing a reduction in local fuel prices, calling for the Cabinet to approve a price adjustment in line with falling global prices.
In a statement issued yesterday, the Power and Energy Ministry stated that a significant reduction in global fuel prices had been observed over the past few weeks and a proposal on reducing local prices would be made by Minister Amaraweera to Cabinet.
“I have already held discussions with the Ceylon Petroleum Corporate (CPC),” Minister Amaraweera was quoted as saying. “The CPC bears a minimum loss of Rs. 6.60 per litre on diesel annually. However, if fuel can be sold to the public at a concessionary rate, we will not hesitate to do so.”
Experts have also pointed out that maintaining fuel prices may help the CPC recoup some of its losses and offset expenses that could be generated through higher thermal power generation necessitated by reducing water levels for hydropower generation and the partial closure of Norochcholai for maintenance purposes.
The Lakvijaya Power Station returned to full capacity in February.
However, the Lanka Indian Oil Company (Lanka IOC), expressed concerns over a possible reduction, arguing that calls for the reduction of fuel prices should not force “impulsive decision-making” at the Government level.
A senior Lanka IOC official, speaking to the Daily FT, said that the Government should not make impulsive decisions on the matter, noting that the company could suffer large losses if the price was reduced at this stage as they had made earlier purchases when prices were higher.
“Our bunker stock is full. It was purchased in January when the price of a barrel of crude was over $ 70 and February when it was $ 67, and the stocks will last until late April or the first week of May. If we were to reduce the cost now, we would have to absorb a massive blow financially,” the source said while speaking on the condition of anonymity.
Commenting on the rapid decline of the price of a barrel of oil, the official stated that it was due to a disagreement between Saudi Arabia and Russia.
“What happened at the OPEC was Saudi Arabia posturing to Russia, to show Russia how far they (Saudi Arabia) were willing to go. The price of oil can go up in a few days,” he pointed out. He said that a spike in oil prices in the last quarter of 2019 had already impacted LIOC significantly, arguing that a price reduction at this point would be difficult for the company.
“If the price drop continues for more than a month or two, then a price reduction may be possible as we can purchase stocks at a lesser price and pass on some relief to the public,” he opined.
He would not comment when asked if the LIOC would follow the Government if the Cabinet decided to reduce the price of fuel.
