By Shamindra Ferdinando
Government efforts to provide an uninterrupted supply of fuel to CEYPETCO pumping stations have suffered a debilitating setback due to unprecedented high demand caused by stark price differentials between CPC-owned and PC-run gas stations. the Lanka India Oil Company (LIOC).
CPC Chairman Sumith Wijesinha said yesterday (28) that with the latest price increase announced by LIOC, a liter of petrol and diesel, at LIOC filling stations, now costs Rs. 27 and Rs 18, respectively, more than at CEYPETO resorts.
Wijesinha acknowledged that the price difference is the biggest since LIOC entered the Sri Lankan market. A union affiliated with the main opposition Samagi Jana Balavegaya (SJB) asked the government how the LIOC could increase fuel prices, contrary to existing agreements.
LIOC entered the Sri Lankan market in 2003 during Chandrika Kumaratunga’s tenure as chairman. India’s state-owned company has gradually expanded its operations here and now operates 202 gas stations.
In addition to the oil terminal it managed in Trincomalee, LIOC owned a third of the shares of Ceylon Petroleum Storage Terminals Limited (CPSTL) – a joint venture involving LIOC and CPC. The CPSTL operated 13 oil terminals.
Wijesinha admitted that the LIOC has the right to decide fuel prices alone. LIOC increased the price of gasoline and diesel on February 6 and 25, 2022, starting at midnight each day. On February 6, LIOC raised the price of a liter of petrol by Rs 7 and diesel by Rs 3. On February 25, LIOC raised the price of a liter of petrol by Rs 20 and diesel by Rs 15.
LIOC chief executive Manoj Gupta, in a statement on the eve of the Feb. 25 price hike, said the sharp rise in international oil markets was forcing them to raise the price of gasoline and diesel. Pointing out that the price of Brent crude oil was now above $100 a barrel, Gupta blamed the Russian invasion of Ukraine as well as lower supply by OPEC countries for the situation.
Following the February 6 price increase, Energy Minister Udaya Gammanpila said he had been informed of the impending price increase by the LIOC. The Minister said so when The Island asked for his response to the fuel price hike.
Minister Gammanpila also acknowledged that according to the agreement between Sri Lanka and India, the latter could decide on the pricing formula.
The third retailer Laugfs Petroleum follows the CEYPETCO pricing formula. Laugfs entered the market in 2004 also under the chairmanship of Kumaratunga.
Although the cash-strapped and debt-ridden CPC suffered massive losses, the government delayed the corresponding LIOC pricing formula, attracting the vast majority of consumers to its gas stations. CPC Chairman Wijesinha said their daily losses increased sharply as sales volumes increased.
In a recent meeting chaired by President Gotabaya Rajapaksa at the Presidential Secretariat, Finance Minister Basil Rajapaksa pointed out that imported pharmaceuticals were the only items subject to price controls.
The opposition trade union group representing workers in the oil, ports and electricity sectors (28) yesterday (28) questioned the government’s inability to prevent the LIOC from raising oil prices contrary to the existing agreement between the two parties. Having made huge profits in 2021, the LIOC seemed determined to further exploit the hapless Sri Lanka, trade union leader Samagi Ananda Palitha stressed that the LIOC could not raise prices in any way without specific approval from the Ministry of Energy in the absence of a regulator as provided for in the agreement between the two parties.
When asked if the price increases announced by the LIOC on February 6 and 25 were illegal under existing agreements, Ananda Palitha pointed out that this would be the case if the Ministry of Energy objected. Responding to LIOC claims that oil markets were jittery following the Russian invasion of Ukraine and other related factors, Ananda Palitha pointed out that the CPC and LIOC were still receiving stock ordered 35 years ago. days.
LIOC MD Gupta said he was the only state-owned energy limited company operating here and was responsible for more than 10,500 local shareholders.
The outspoken union leader has called for a total review of all agreements between Sri Lanka and India over the LIOC and Trincomalee oil parks. According to him, in the absence of an appropriate energy policy, Sri Lanka was at the mercy of India and other foreign powers.
Reference was made to the controversial circumstances under which Sri Lanka finalized an energy deal with the US company New Fortress Energy in September last year. The case is now before the Supreme Court.
Ananda Palitha said the government cannot absolve itself of the responsibility of ensuring a steady supply of fuel at reasonable prices for consumers.