Ranawaka promises transparent pricing mechanism for fuel


By Ifham Nizam

Lack of a transparent pricing mechanism for petroleum products is a major shortcoming, says Power and Energy Minister Patali Champika Ranawaka.

Speaking at a workshop titled ‘Downstream Petroleum Industry – supply, quality, pricing and regulatory issues’ on Monday in Colombo, he said except a short period in 2002, there has been no laid down pricing policy for petroleum products here.

The Minister said that prices had been arbitrarily fixed by the Ceylon Petroleum Corporation (CPC) or the government without fluctuating oil prices in the international market being taken into consideration.

"Only the losses incurred due to increases in international oil prices were passed on to the consumer the minister said sounding concerned.

 He said in 1986, when the crude oil prices dropped to about USD 10 per barrel, the government had imposed a Customs Duty of 45% on crude oil, compelling CPC to maintain high prices.

 "In my view we must take appropriate action so as not to unduly burden the consumer with inflated costs. Yet, the utility must also generate sufficient revenue for investment in developing infrastructure such as refineries, storage facilities and pipeline systems," he said.

 Ranawaka said he believed that a transparent cost reflective pricing mechanism would benefit both the consumer and the utility.

 The government had taken necessary action to reduce excessive taxes imposed on petroleum products, Minister Ranawaka said.  A cost reflective transparent pricing formulae, based on international market prices,would be introduced soon, he said.

 "With the formulae, consumers will be privy to breakdown of various cost components such as cost of product in the international market, freight and insurance costs, government taxes and marketing margin," he said, stressing that the marketing establishments would not be able to hide their inefficiencies in the future as every action and activity would be scrutinized by an independent regulatory body. "No longer will those institutions be able to pass unreasonable costs to the consumer," he stressed.

He said that when it came to infrastructure, the CPC was burdened with ageing and inefficient facilities such as the refinery, pipeline systems and storage facilities, development and modernization of which were long overdue.

The Sapugaskande oil refinery had been completed in 1969. While it produced 100% of the country’s requirement of refined petroleum products until about 1990, today it can supply only 30% of the refined products requirements. It could not produce environmentally friendly fuels required by modern vehicle fleet, the minister said.

While the need to modernise and upgrade the refinery had been recognised for quite some time no action had been taken to implement it, he said.

The workshop had been organised by the Public Utilities Commission of Sri Lana (PUCSL).

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