Fuel distributors seek President’s intervention over revised commission structure

Wednesday, 22 April 2026 00:25 - - {{hitsCtrl.values.hits}}

Notes revised model is financially unsustainable
Operators continue to face pressure due to VAT, upfront cash purchases, and rising working capital requirements when prices increase, without corresponding adjustment in per litre earnings

The Petroleum Distributors’ Association has appealed to President Anura Kumara Dissanayake, calling for urgent intervention to revise the current fuel dealer discount mechanism, warning that the existing system threatens the viability of filling stations across the country.

In a letter to the President, the association noted that the efforts to resolve the issue through discussions with institutions including the Ceylon Petroleum Corporation (CPC) had failed, prompting escalation to the highest level.

At the centre of the dispute is Circular No. 1109, issued on 25 February 2025 and implemented from 1 March 2025, which introduced a new commission structure.

The association claims the CPC unilaterally replaced the previous percentage-based commission with a fixed per-litre margin, effectively capping dealer income within a narrow range.

Distributors argue that the revised model is financially unsustainable, with earnings now insufficient to cover staff salaries, loan repayments, maintenance costs, and other operational expenses.

They warned that the pressure is particularly acute for operators servicing bank loans, raising the risk of closures among both private and cooperative filling stations.

The association noted that nearly 98% of fuel stations are run as private or joint ventures, while alleging that only a limited number of licences have been issued under political patronage. It also criticised the lack of prior stakeholder consultation before the new pricing mechanism was introduced.

Under the current framework, the CPC operates on a cost-recovery pricing model, passing its costs into retail prices. However, distributors said this has created a structural imbalance, forcing them to absorb rising operational costs while their margins remain fixed.

Although some private distributors maintain a margin of around 3% of the selling price, operators continue to face mounting pressure due to VAT payments, upfront cash purchases of fuel, and rising working capital requirements when prices increase, without a corresponding adjustment in per litre earnings.

The association cautioned that if unresolved, the issue could disrupt the fuel distribution network and impact consumers’ access to fuel. It has called for the appointment of an expert committee with industry representation to develop a more sustainable and consultative pricing mechanism.