Industries renew call for lower furnace oil prices

Monday, 16 February 2015 00:21 - - {{hitsCtrl.values.hits}}

By Channa Fernandopulle The Industrial Associa-tion of Sri Lanka (IASL) and the Sri Lanka Ceramics & Glass Coun-cil are repeating requests for a reduction in furnace oil prices to a minimum Rs. 50-55, in order to ease the burden of prohibitively high costs of production. “We had made representations to the previous Government and we are now making the same representations to the new regime. Ever since the last price increase our margins have been severely eroded and we find it very difficult to compete with countries like India which almost immediately converte

d the benefit of reduced petroleum prices to a reduction in furnace oil prices,” Piramal Glass Ceylon PLC CEO Sanjay Tiwari stated. Approximately 40% of production costs in the glass and ceramic industry are generated by energy costs with Piramal Glass reportedly consuming approximately 30,000 litres of furnace oil per day. The previous Government increased the price of furnace oil from Rs. 40 per litre in April 2011 to Rs. 90 per litre in February 2012 at a time when international oil prices had peaked at approximately $120 per barrel. Since then furnace oil prices have remained static in Sri Lanka despite significant reductions-almost 60% to date-in international oil prices, which currently hover between $50-55 per barrel. When questioned about a potential reduction in furnace oil prices, Secretary to the Treasury, Dr. R.H.S. Samaratunga had recently stated that his primary concern would be with regard to how such a reduction could take place without adversely impacting the Ceylon Petroleum Corporation. “The Government has taken steps to bring down all important prices at this stage. Concerns have been raised with regards to the furnace oil prices as well but it is a matter for the Finance Minister and Energy Minister to discuss and reach an agreement as to how to bring down the furnace oil price as well. I would like to mention that since October 2014, the use of furnace oil has come down drastically hence it has not been a pressing concern at this time.” Furnace oil, also known as fuel oil is a residual fraction of petroleum obtained from the distillation of imported crude oil and is often used in the generation of electricity in Sri Lanka during times of water shortages which lead to reduced hydroelectric power output. Responding to such statements, Tiwari reiterated that his industry was nevertheless being forced to incur a heavy burden of Rs. 80 per litre of furnace oil when competitors internationally were enjoying prices of approximately Rs. 46 per litre. He added: “When we look at imports of LITRO gas the price is linked to international prices in a transparent manner using a pricing formula. The benefits of price reductions and the burden of any increases are passed on to the consumer in a flexible and transparent manner and there are no problems even though prices are revised every month. Using that example, why can’t we link furnace oil prices to international petroleum prices using a similar formula?”