Tuesday September 22, 2026 11:15 am
Tuesday September 22, 2026 11:15 am
ECONOMYNEXT — Sri Lanka cannot legally provide fuel subsidies exclusively to the state-run Ceylon Petroleum Corporation (CPC) or enforce a maximum retail price because agreements signed with private distributors in 2022 require equal treatment, Minister of Energy Anura Karunathilaka said in Parliament.
Responding to questions, Karunathilaka said the government is legally prevented from giving financial relief to the CPC while excluding foreign operators such as Lanka IOC, Sinopec, and RM Parks.
“Because equal treatment must be granted, we cannot provide subsidies to the CPC alone while withholding them from LIOC. If we do, they will have to pursue legal action. That is the direct consequence of the agreements entered into in 2022,” Karunathilaka said.
The minister noted that when global oil prices surged in April and May, the state provided a subsidy of 100 rupees per liter of diesel and 20 rupees per liter of petrol, disbursed to all operators based on their previous month’s sales volumes without any preference for the CPC.
Karunathilaka said under the 2022 agreements, every operator is entitled to a 4 percent profit margin over its landing cost.
If the government enforces a price cap that falls below an operator’s actual costs and margin, the Treasury is legally obligated to pay the deficit.
Setting a ceiling to accommodate the highest-cost importer would allow lower-cost players to make excessive profits, which would be unfair to consumers, he said.
As a result, the government only announces the CPC’s retail price, leaving other companies free to set their own, he said.
Opposition Member of Parliament Ravi Karunanayake challenged the policy, questioning why public funds were being used to support foreign players that were brought in to import fuel using their own foreign exchange.
“If a government is maintaining a subsidized price, give it to the Ceylon Petroleum Corporation, and allow those other companies to import at whatever price they want and sell at whatever price they want,” Karunanayake said.
Karunanayake warned that local dealers are facing severe financial distress. He noted that of the island’s 1,456 filling stations, 220 are allocated to LIOC, 150 to RM Parks, and 150 to Sinopec.
He added that dealer commissions had been reduced from over 3 percent down to 1.2 percent, while operators face taxes exceeding 30 percent along with a 2.5 percent Social Security Contribution Levy (SSCL), putting local distributors at risk of being replaced. (Colombo/Sep22/2026)