Delayed Reaction

Jan 13, 2008 (LBO) – Sri Lanka has raised fuel prices from midnight Sunday with petrol and furnace oil going up by 10 rupees, diesel 5 rupees and kerosene 2 rupees, the state-run Ceylon Petroleum Corporation (CPC) said. The new price of 90-octane petrol is 127.00 rupees, 95-octane petrol 130.00, auto diesel 80.00, super diesel 85.30 rupees, kerosene 70, furnace oil 1500sec 61.70 and furnace oil 3500sec 56.65 rupees.

Overpricing

The gap between petrol and diesel has now expanded to 47 rupees. Petrol is widely used by small car owners and motorcycle users while diesel is used by businesses and richer sections of society who can afford diesel vehicles, including politicians.

About 30 percent of petrol pricing is made up of taxes, and utilities also overcharge petrol users to cross subsidize diesel. So far consumer lobbies have not taken a utility to court on overcharging petrol users.

Sri Lanka last raised fuel prices on July 28, 2007 but a political decision was made to freeze prices until the end of the year.

Though Sri Lanka has a cost based pricing formula, political interference has made it difficult to implement it.

Due to poor understanding of macro-economics Sri Lanka's po