Soaring Fuel Prices

by K. Mylvaganam, July 21, 2008

The soaring prices of fuel are choking the economy of the Government of Sri Lanka (GoSL). The people are getting affected on many fronts. First and foremost, the high prices they pay for fuel that affects them directly and, secondly, the indirect ways the consumer has to pay in hidden forms. The high prices the transport firms pay for their fuel are passed on to the consumer. Hence, the prices of all goods transported increase. This includes not only food items but all and sundry items, that are transported from the place where they are produced to the sales outlets.

Bus fares have gone up by 27% and train fares are up from 100% in most cases and are increasing up to 400% on certain selected routes. Since there is a general shortage of fuel, queuing in front of filling stations is a colossal waste of man-hours. Gas stations are packed with vehicles.

The table below illustrates the rapid increase in price of the various fuels during a period of 4 years

In Vanni one will consider herself/himself to be lucky if the fuel is available at the filling stations even at these exorbitant prices. The prices in Colombo have gone up by 300% within the past 4 years.

The effects of increasing the prices are very damaging. For example, if a trishaw driver puts up his price for a ride in his vehicle, the consumers will avoid engaging the vehicle. His income thus will drop and he will face problems at home both financially and socially. The plight of the farmers is also the same. He cannot go on increasing the prices of his products as the demand is sure to fall. Hence his profit margin will fall if he cannot increase the price to compensate the high price he pays for the fuel. If he were to resort to intensive cultivation instead of extensive with a view to cut down on the consumption of the fuel, his quantum of production will go down; thus ending up in square one. When the supply is reduced the demand will go up ending in an increase in the prices, which will eventually affect the consumer, as the sales are sure to drop.

A table showing the price increase in Colombo in one year and the present prices prevailing in Vanni is appended for the readers’ observation.

The representative of the trade union at the Ceylon Petroleum Corporation (CPC) blamed the management for its mismanagement of the CPC. He added that there were several options left to the management before they go on a price hike. He points out that the CPC has failed to go into the business of bunkering despite the trade union urging them to do so. He says that bunkering will bring in Rs.500 million a day. And that is half the daily running cost, which is Rs.1,000.00 million. He fears that the Indian oil company the Lanka Indian Oil Company (LIOC) is going take up to bunkering quite soon. He also suggested that the refinery at Sapugaskanda should be expanded.

The United National Party (UNP) member Ravi Karunanayake states t hat the CPC is making a profit of Rs.7 Billion an year. But the finance manager of the CPC contradicts this statement and says that the CPC is running at a loss. One of these two is certainly lying. If the finance manager is telling the truth, why cannot not he present the latest audit report in public and prove his point.

Over to you, finance manager Lalith Karunaratne...