CPC, Lanka IOC rules out price reduction

Diesel and kerosene sold at a loss - CPC:

by Gamini Warushamana

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Although the crude oil price continues to decline, the Ceylon Petroleum Corporation (CPC) and Lanka IOC said there is no possibility of reducing petrol and diesel prices in the local market. The crude oil price reached the last March level and last week the price was below $110 a barrel. Minister of Petroleum and Petroleum Resources Development A. H. M. Fowzie said that since the Ceylon Petroleum Corporation is selling diesel and kerosene at a loss it cannot consider a price reduction right now.

CPC Chairman, Asantha De Mel said that the CPC has stocks that were purchased at higher prices and added that the petrol and diesel that comes to the market today were purchased three months ago. Therefore, the CPC cannot reduce the oil price at present, De Mel told the Sunday Observer.

However, CPC sources said that the CPC's total supply of diesel and petrol is not dependent on its Sapugaskanda refinery. While the CPC purchases crude oil from Iran on a government to government basis it also imports petrol and diesel. Therefore, the CPC can maintain a flexible price structure. A 50,000- tonne diesel shipment for the CPC is due to arrive today in the Colombo Port. The CPC calculates its petrol and diesel price on the previous month's average price in the international market.

These prices fluctuate monthly and since the market price is fixed the operators earn an excess profit or run at a loss.

However, according to market analysts, petrol and diesel prices have reduced significantly. In August the average international prices of diesel and petrol were $ 134.29 and $ 113.95 per barrel. In July the prices were $ 167.47 and $ 134.70.

According to the CPC price formula, diesel and petrol prices should dip by $33.18 and $20.75 per barrel in September. Accordingly, the petrol price should drop by Rs. 14/litre and diesel by Rs. 22.50/litre.

Meanwhile, the Managing Director of Lanka Indian Oil Company (LIOC), K. Ramakrishnan said that a price revision is not possible this year. We incur a loss of Rs. 9/litre in selling diesel and we have incurred a total loss of Rs. 280 million. We need time to recover this amount and, therefore, we cannot reduce the price until December.

However, the price revision would be up or down and we can reduce the price only if the crude oil price remains low, Ramakrishnan said.