Trade union says Energy Ministry has regulatory powers to intervene

Fuel pumping

The government’s efforts to provide an uninterrupted fuel supply at CEYPETCO pumping stations has suffered a debilitating setback due to the unprecedented heavy demand caused by sharp differences in prices at the CPC-owned and the Lanka India Oil Company (LIOC) managed service stations.

CPC Chairman Sumith Wijesinha yesterday (28) said that with the latest price increase announced by the LIOC, a liter of petrol and diesel, at LIOC service stations, now costs Rs. 27 and Rs 18, respectively, more than at CEYPETO stations.

Wijesinha acknowledged that the difference in prices is the sharpest ever since the entry of LIOC into the Sri Lanka market. A trade union affiliated to the main Opposition Party, the Samagi Jana Balavegaya (SJB) asked the government how the LIOC could increase fuel prices, contrary to the existing agreements.

LIOC entered the Sri Lanka market in 2003 during Chandrika Kumaratunga’s tenure as the President. The Indian state enterprise gradually expanded its operations here and now it operated 202 service stations.

In addition to the oil terminal it managed at Trincomalee, the LIOC owned one-third share in the Ceylon Petroleum Storage Terminals Limited (CPSTL) – a joint venture involving the LIOC and the CPC. The CPSTL operated 13 oil terminals.

Wijesinha admitted that the LIOC had the right to decide on fuel prices on its own. LIOC increased the price of petrol and diesel on Feb 6 and Feb 25, 2022, effective midnight on each day. On Feb 6, LIOC increased the price of a liter of petrol by Rs 7 and diesel by Rs 3. On Feb 25, LIOC jacked up the price of a liter of petrol by Rs 20 and diesel by Rs 15.

Managing Director of LIOC Manoj Gupta, in a statement issued on the eve of Feb 25 price increase said that the steep rise in international oil markets compelled them to increase the price of petrol and diesel. Pointing out that the Brent crude oil price was now over USD 100 per barrel, Gupta blamed the Russian invasion of Ukraine along with drop in supply by OPEC countries for the situation.

In the wake of Feb 6 price increase, Energy Minister Udaya Gammanpila said that he was informed of the impending price increase by the LIOC. The Minister said so when The Island sought his response to the fuel price hike.

Minister Gammanpila, too, acknowledged that in line with the agreement between Sri Lanka and India, the latter could decide on the pricing formula.

The third retailer Laugfs Petroleum follows the CEYPETCO’s pricing formula. Laugfs entered the market in 2004 also during Kumaratunga’s presidency.

In spite of the cash-strapped and debt-ridden CPC taking massive losses, the government has delayed matching LIOC pricing formulas, thereby drawing the vast majority of consumers to its service stations. CPC Chairman Wijesinha said that their daily losses went up sharply as the sales volumes grew.

During a recent meeting chaired by President Gotabaya Rajapaksa at the Presidential Secretariat, Finance Minister Basil Rajapaksa emphasized that imported pharmaceuticals were the only items subjected to price controls.

Opposition trade union grouping representing oil, port and electricity sector workers yesterday (28) questioned the failure on the part of the government to prevent LIOC increasing oil prices contrary to the existing agreement between the two parties. Having earned massive profits in 2021, the LIOC seemed determined to further exploit hapless Sri Lanka, convener of Samagi trade union grouping Ananda Palitha emphasized that LIOC couldn’t under any circumstances increase prices without specific approval from the Energy Ministry in the absence of a Regulator as envisaged in the agreement between the two parties.

Asked whether the price increases announced by the LIOC on Feb 6 and 25 were illegal in terms of the existing agreements, Ananda Palitha pointed out that would be the case if the Energy Ministry opposed the move. Responding to LIOC claims that oil markets were jittery in the wake of the Russian invasion of Ukraine and other related factors, Ananda Palitha stressed that both the CPC and the LIOC still received stocks ordered 35 days ago.

LIOC MD Gupta has stated that his was the only public limited energy company in business here and was accountable for more than 10,500 local shareholders.

The outspoken trade union leader called for a total review of all agreements between Sri Lanka and India as regards LIOC and Trincomalee oil tank farms. According to him, in the absence of proper energy policy Sri Lanka was at the mercy of India and other foreign powers.

Reference was made to the controversial circumstances under which Sri Lanka has finalized an energy deal with the US-based New Fortress Energy, in September last year. The matter is now before the Supreme Court.

Ananda Palitha said that the government couldn’t absolve itself of the responsibility for ensuring steady supply of fuel at reasonable prices to the consumers.

(Source: The Island – By Shamindra Ferdinando)

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