ECONOMYNEXT – Sri Lanka’s state-owned Ceylon Petroleum Corporation (CPC) has decided to implement a fixed amount for dealer margin from November 1 instead of a fixed percentage in the existing price formula, a top official said, in a move to reduce the fuel cost.
However, dealers have challenged the decision of CPC Board of Directors in court, which has stayed the decision until November 12, the fuel retailer’s Chairman D J A S De S Rajakaruna said.
The move comes after public grumbling of price reduction by President Anura Kumara Dissanayake ahead of his election on September 21.
Dissanayake and his Marxist Janatha Vimukthi Peramuna (JVP) members have said the previous government had imposed more than a 30 percent tax and they will remove the tax once they win the election.
Since coming to power, Dissanayake government has reduced widely used Octane 92 and white diesel prices once.
The dealer margin under the existing price formula is 2.96 percent of the retail price per liter. Instead, the CPC had decided to implement a flat rate of 6 rupees per liter.
The dealer margin covers administrative expenses, personnel cost, operational cost and overhead cost elements like electricity and water bills.
“After we were appointed to the (CPC) board, we decided that it was unfair to link the dealers’ margin directly to the world market price. It can’t happen,” CPC Chairman Rajakaruna said.
He said once the court gives the order, the 6 rupees per liter standard dealer margin will be backdated from November 1.
The dealer margin stands at 9.33 rupees for Octane 92 and 11.13 rupees for Octane 95, while it stands at 9.39 rupees for Super Diesel and 8.49 rupees for White Diesel, Rajakaruna said.
The standard 6 rupee dealer margin will enable the CPC to reduce the prices of fuel between 2.49-5.13 rupees, depending on the fuel variety.
“The margin includes electricity bill, water bill, employees’ wages, and other factors. These factors are decided on the Sri Lankan situation,” Rajakaruna said.
“Now these days, Iran is being attacked. When Iran is bombed, the world oil prices increase. Then the dealers’ expenses will go up in a day according to the current system.”
“So this is why we say it is not a fair system. Our board decided to have a standard price formula.” (Colombo/November 05/2024)