Fuel Price Formula proposed to Cabinet - Minister | Daily News

Fuel Price Formula proposed to Cabinet - Minister

* CPC Debt of Rs. 720 Bn to BOC and People’s Bank
* Foreign borrowings on long term to spread out the losses

The Ceylon Petroleum Corporation (CPC) will propose to the Government to usher in a Fuel Price Formula (FPF) soon in the wake of the debt of US$ 3.6 Billion (Rs.720 Billion) that the CPC owes the Bank of Ceylon (BOC) and the People’s Bank.

It is impossible to continue in this manner with successive Governments absorbing the losses of the CPC and I will recommend to the Cabinet to bring in a FPF in the near future, Energy Minister Udaya Gammanpila told the Daily News yesterday.

“This will create an atmosphere where we can increase the prices when the global prices are up while we can reduce the prices when the prices are down. The absence of a price reflective mechanism was the cause of the CPC’s woes,” Minister Gammanpila said. Successive Governments have not implemented a cost effective pricing mechanism and this is the debt which has accumulated over the last 20 years, the Minister said.

Responding to a question on how the CPC proposes to restructure these debts, the Minister said the Government was dealing with foreign banks and other overseas institutions to borrow at interest rates lower than the rates it is paying the BOC and the People’s Bank.

“The problem we are faced with is that fuel prices are going up and poised to go up even further. We don’t have adequate Natural Gas or oil. We also have a US Dollar crisis as well”.

“We have no issues with funding for petroleum products and consume US$ 350 Million monthly for fuel imports from the US$ 1 Billion we earn monthly from exports. But there could be no USD for other expenses such as foreign exchange for students going overseas and patients seeking medical treatment abroad. We also need another oil refinery,” he said.

Responding to a question on the latest status quo of the Sapugaskanda Crude Oil Refinery and why it was closed down and for how long it would be closed, he said he had directed the CPC to have it ready in 50 days but he expected them to open it before that.

He explained that the refinery was 51 years old and when one barrel of crude oil was processed, the output was 37 per cent Naphtha and Furnace Oil. Right now, there is less demand from the Ceylon Electricity Board (CEB) as they are mostly utilising hydropower. “At the time the Sapugaskanda Refinery was closed, we had 79,000 tonnes of crude oil left and the import of further stocks would have consumed more foreign exchange and the stocks would have idled in the stores. That would also have stalled the other imports,” he elaborated.

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