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Sri Lanka's state-owned petroleum utility aims to hold
retail fuel prices at current levels for the time being despite crude
oil prices hitting record highs, its chairman Ashantha de Mel said.
Ceylon
Petroleum Corporation (CPC) is hoping income from oil futures hedging
and its refinery resuming production after a shut down for maintenance
would enable it to avoid a price hike.
Despite crude oil prices hitting nearly 106 dollars a barrel,
de Mel said he prefers to wait and see if prices fall and perhaps take
a decision on raising retail fuel prices towards the end of this month.
"At the moment we're not very keen to raise retail fuel prices
because we realise all commodities have been going up and there's going
to be an increase in electricity tariffs as well," he told LBO in an
interview.
"But we're trying to see whether we can manage. With the
refinery resuming production we can at least wait for a couple of
months and see whether prices are going to ease out without burdening
the consumers right away."
The island's sole refinery owned by the CPC at Sapugaskanda,
north of Colombo, has a capacity of 50,000 barrels per day and can
refine only about half the island's requirement.
It was shut for routine maintenance on January 21 and resumed production towards the end of February.
De Mel said the CPC was looking for alternatives to raising retail fuel prices.
"One thing we can look at is hedging, something we already started. In
March our hedges have done quite well and the fair amount of money we
earned we can use to subsidise for the month of March.
"So towards the end of month we can review the situation and see where we stand and whether we really need to raise prices."
De Mel said that petrol is being sold at market prices while the
government is subsidising kerosene and diesel in order to reduce the
burden of inflation on low income people.
"Kerosene is used mostly by fisher-folk and low-income people
and diesel is used mainly for power generation and transport. So we
have to very careful in trying to raise prices. It's only as a last
resort that we'll look at raising prices."
The utility has however come under fire for over-pricing petrol
- which is cheaper than diesel in world markets - to cover losses in
diesel sales.
Fuel subsidies which suddenly increase losses in CPC which are
then financed with bank debt or tax rebates have been blamed in the
past for creating economic imbalances which results in currency
pressure and high inflation.
PetrolWorld 090308
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