Private fuel suppliers raised the prices of Octane 95 petrol and Super Diesel despite a government fuel subsidy because a pricing formula gives them room to do so, Energy Ministry Secretary G.M.R.D. Aponsu has said.

The government introduced the subsidy after private suppliers pressed for higher prices, arguing that market conditions had become difficult to sustain. The increases followed anyway, raising the question of whether the relief is reaching consumers.

The formula, in the Secretary’s words

Aponsu said private companies had repeatedly told authorities they could not absorb losses when world prices swing sharply, and that the government’s answer was a framework allowing them some flexibility.

“When fuel prices experience significant fluctuations, the three operators other than CPC tell us they cannot absorb the losses. We have therefore given them a pricing formula. Under that formula, they are allowed to increase prices within a prescribed limit. That is why they have increased the prices of Octane 95 petrol and Super Diesel. They have that freedom within the framework provided to them,” he told NewsFirst.

He added that distributors are also obliged to hold minimum stock levels and keep releasing fuel to the market under existing regulations.

”The market was not created on equal terms”

Aponsu’s second point was structural, and blunt. The difficulties are not new, he said, but date to the way private participation in the fuel trade was set up.

“This is not an arrangement that came into effect yesterday. These agreements have been in operation for years. There was a problem from the very beginning. The market was not created on equal terms for all companies. It was not designed as a truly competitive marketplace. What existed under CPC was essentially distributed among the other companies, creating distortions from the outset,” he said.

While policymakers continue to talk about building a competitive fuel market, he said, the infrastructure needed for genuine competition has not been fully developed.

The government’s answer: 72 new CPC stations

Aponsu said the government intends to establish 72 new fuel stations under the Ceylon Petroleum Corporation. Expanding the CPC retail network is, according to the Energy Ministry, currently the government’s primary response to improving competition and stabilising supply.

This is the clearest official statement so far of a policy direction: the state’s remedy for a market it concedes was never competitive is to grow the state operator’s own footprint, rather than to change the terms the private operators sell under.

Context

The Energy Ministry has been examining the private operators’ position for some weeks. On 7 November this desk reported that the ministry was seeking legal advice on the 20-year pricing agreements signed with private suppliers, after Sinopec and RM Parks cut distribution while the state absorbed most of a sharp rise in world prices. Aponsu’s remarks describe the same agreements from the ministry’s side, and confirm that the formula permitting price increases is part of them.

Sourcing note

This article rests on a single filing, published by NewsFirst at 2.43 p.m. Colombo time on Wednesday. Searches of the Daily Mirror, EconomyNext, The Island, Daily FT and Hiru found no other verified newsroom carrying Aponsu’s remarks, and neither the Daily Mirror nor the Hiru rail held a matching story. Ada Derana has been unreachable from this desk. The quotes are reproduced as NewsFirst published them.

Not reported

The filing does not state what the prescribed limit in the formula actually is, when the formula was issued, or which three operators it covers by name. It gives no figures for the size of the fuel subsidy, the amounts by which Octane 95 and Super Diesel rose, or the dates of those increases. It does not say where the 72 CPC stations will be built, what they will cost, who will fund them, or over what period — nor whether CPC’s own prices are set under the same formula.