Fuel for growth

The reduction of fuel prices across the board is good news all around. It is a substantial reduction which will have a great impact on our wallets. With oil prices in the world market at a record low, a price decrease was very much on the cards even though the previous regime was reluctant to pass on the full benefit of the developments in the world market. The base price was inflated by a series of taxes and duties which too have been reduced by the new Government.

Private bus fares should be adjusted without delay to afford relief to commuters who have to spend a considerable amount from their salaries and other income just for travel. The authorities should also explore the possibility of bringing down train fares, which are already lower than those of the bus services, both public and private.

Three wheeler and Nano taxi fares should also come down accordingly. Transporters of goods including foodstuffs will now have a lower transport bill, which should hopefully translate into reduced prices of food and other goods in the open retail market. Fishermen too will benefit as they will have to spend less on fuel for their Out Board Motor (OBM) marine engines.

Despite a near 90 percent main line electricity penetration, there are many households in the country that still depend on kerosene for lighting and cooking. The reduction of kerosene prices will thus benefit a large segment of the population.

The operation of thermal power plants and generators will also become cheaper as fuel prices decline. There is no clear idea whether jet fuel is included in the price revision (in any case, it is not a retail business), but worldwide, cheaper jet fuel has enabled airlines to reduce their operating costs. There is no reason why it should not apply to SriLankan and Mihin, both of which are loss making institutions.

The price decrease is not without its pitfalls. With an abundance of cheaper fuel, private motorists are likely to go on more journeys which will put pressure on the fuel supply. We may to have to import more fuel in the medium term, but hopefully the prices will go down or at least stay where they are. Sri Lanka used to spend around US$ 6 billion a year on fuel imports, which is just marginally lower than the figure earned by expatriate workers.

Healthy

The reduction of this fuel bill, plus an oil refinery that can work at full capacity, will be very healthy for the economy. Sri Lanka is poised to strike oil, but the process of commercial exploitation will take at least 10 more years. Until then, Sri Lanka will be a net oil importer and the authorities will have to keep an eye on the forex situation as well.

There is also a need to import and/or refine better quality fuel. Some carmakers have especially tuned their engines for so-called ‘Sri Lankan’ fuel because the engines in their original form would not work with the fuel available here. As carmakers go for lower emission standards, it is imperative that better quality fuel is available around the island at both CPC and LIOC filling stations.

The proliferation of brand new hybrid, plug-in hybrid and fully electric cars has reduced overall fuel consumption. One can imagine the savings when some plug-in hybrids can achieve a fuel consumption of 60 kilometres per litre (depending on road, traffic and driving patterns), which is really amazing.

On the other hand, most petrol or diesel cars will be happy to manage 10 kilometres per litre. Duties and taxes should be slashed on hybrid and electric cars as well as on electric scooters, which will further popularise them and lead to a reduction in fuel consumption. The authorities should also be alive to developments such as fuel cell hydrogen cars (such as the new Toyota Mirai).

It is also time to remove excessive duties and taxes on small-engined brand new petrol and diesel cars - those below 1.2 litres which can achieve very good fuel consumption figures exceeding 22 km per litre. This is a good option for those who cannot afford a hybrid or electric car.

The authorities should also consider reducing the exorbitant duties on diesel cars. Although the duty structure was meant to deter private motorists from enjoying the lower pump prices of diesel, it no longer makes any economic sense, partly because so many diesel passenger cars have come through the permit route, depriving that duty revenue in any case.

Diesel cars usually do more kilometres per lire than their petrol counterparts. Some diesel cars can do 1,000 Km on a single tank of fuel. This could lead to huge forex saving in the long run. It is in fact better to rationalise and streamline the entire duty structure for private passenger vehicles and perhaps do away with the permit schemes which have created a massive imbalance in the vehicle market.

Right

Buying a vehicle is a right. Everyone aspires to own a vehicle and one cannot stop that in a democracy. But what can be done is taking steps to deter car use, especially at peak hours. For example, some countries do not allow cars with less than two people to enter the main cities at rush hour. Some cities such as London charge a congestion fee, which is waived for electric cars. Some countries even allow cars to be sold at a cheaper price on the condition that they could be used only during off peak hours and on weekends and public holidays. A special numbering system is allocated for such cars.

But the best way is to have a modern, clean and efficient public transport system such as the proposed Colombo monorail.

A Bus Rapid Transit (BRT) can also be established, whereby buses can use especially designated lanes and halts, even against oncoming traffic. Some countries allow public taxis and electric cars too to use this facility. A better public transport system is the only answer to traffic congestion.