CPC mishandling: Low oil price won’t benefit Lankans

By Bandula Sirimanna

Though public pressure is mounting on the Government to cut fuel prices after the recent slide in the world market, this is unlikely to happen since the Ceylon Petroleum Corporation (CPC) has large stocks of fuel imported earlier at high prices, officials said.

Around 130,000 metric tonnes of refined oil are still stored at the Muthurajawela oil tank complex, a stock the CPC bought at an average price of US$135 a barrel.

A senior official of the CPC told The Sunday Times that under this setup the CPC was not in a position to reduce fuel prices till fresh stocks are purchased at reduced prices. On the other hand, the Corporation could not purchase fuel immediately as it has already stocked refined oil sufficient for a couple of months, he said.

World crude oil prices fell sharply to the $80 levels earlier this week but had been picking up since then and on Friday the price was about $93 a barrel for the Brent variety, according to the Central Bank.

The senior official said that if the present downward trend of oil prices continued the CPC’s oil hedging would bring negative results as it has fixed a price of oil at US $81.50 and US $90 a barrel. He said the country had gained more than US$ 10 million from six oil hedgings that started early last year and that the money was used to reduce CPC losses and maintain price stability.

Meanwhile, the government is to impose on Lanka IOC, the other fuel retailer, an additional import tax of 15% on petrol and 20% on diesel as the Indian oil company is earning huge profits on oil imports, government sources said.

They said a price revision of fuel would be announced before or after the upcoming budget. Plans are also afoot to enforce another, separate tax on the Lanka IOC. Its Managing Director K. Ramakrishnan told The Sunday Times that he also came to know about the imposition of a tax of Rs. 15 on petrol and Rs. 10 on diesel from Thursday, September 18.

UNP MP Dayasiri Jayasekera said the CPC was keeping details of oil hedging as a closely guarded secret and though the Minister of Petroleum Resources had been asked to table all these facts in parliament, he had failed to do so. He said another oil tanker carrying 50,000 metric tons of fuel ordered by CPC was expected to arrive at the Colombo port shortly and there was no storage facility available at the moment for this stock of fuel.

He noted that the CPC would have to pay heavy demurrage charges at the rate of Rs 50,000 a day for keeping the oil tanker in the outer harbour .

UNP General Secretary Tissa Attanayake said the government was not reducing prices despite the CPC earning a profit of Rs. 1.5 billion during the past three months after crude prices dropped to US $91 a barrel in the world market. He said the UNP was planning to take legal action if the government did not reduce local prices soon and the party was consulting its lawyers.

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