News
Govt. to adopt fluctuating fuel price formula
View(s):- Multiple revisions on a weekly basis in line with global market trends
By Damith Wickremasekara
The government will introduce a new fuel pricing formula which could see multiple fuel price revisions within a month based on fluctuations in world oil prices, rather than the monthly review system in place now.
The Cabinet has given approval for the new formula, which will come into effect from May, Foreign Affairs Minister Vijitha Herath told the Sunday Times.
Accordingly, constant monitoring of the prices will take place with the possibility of considering revisions on a weekly basis.
“If world prices are reduced in one week, Sri Lanka will adjust the prices accordingly and similarly, if the prices go up next week the local prices too will be increased,” he said.
The new formula will calculate prices based on actual data from the preceding month; hence, consumers will have to benefit from fuel price drops almost with immediate effect without having to wait for monthly revisions.
The decision has been taken in view of the volatile world oil market following the conflict in West Asia.
The move comes as the International Monetary Fund (IMF), which announced the staff-level agreement on the combined Fifth and Sixth Reviews under the four-year Extended Fund Facility (EFF) arrangement for Sri Lanka on Thursday, said the release of funds—about USD 700 million—hinges on the implementation of cost-recovery fuel and electricity pricing while assisting the most vulnerable.
“Continued vigilance is needed to minimise fiscal risks and safeguard fiscal discipline,” the IMF said.
President Anura Kumara Dissanayake announces this week that at the next fuel price revision, a subsidy of up to Rs 100 per litre of diesel would be provided, calculated against the actual cost. Similarly, a subsidy of up to Rs 20 per litre of petrol will be granted.
The government has already allocated Rs 100 million to provide concessions for those consuming less than 90 units of electricity and fuel at a concessionary rate for the fisheries sector.
Global oil prices remained high on Friday ahead of negotiations between the US and Iran over the weekend in Pakistan, amid uncertainty whether the two-week ceasefire between the two countries will hold.
Brent crude oil, the global benchmark, was priced at just over USD 95 a barrel on Friday, with shipping along the Strait of Hormuz still remaining largely restricted despite announcements that it was now “open”.
The price of oil came down following the announcement of the ceasefire on Wednesday but has been steadily climbing back up towards the USD 100 a barrel mark due to concerns that the fragile pause in fighting could easily fall apart.
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