Advocata Institute Chief Executive Officer Dhananath Fernando said fuel subsidies should be removed immediately, arguing it would not be possible to curb dollar demand without first reducing domestic fuel consumption.
Speaking on the “Mawatha” programme, Fernando said diesel is currently sold at around Rs.392 per litre, while the minimum cost — before dealer margins, taxes or other levies — is approximately Rs.409–410. He said the current price level was not sustainable.
Fernando noted that even if all taxes were removed, demand for fuel would not decline. Fuel accounts for the single largest share of Sri Lanka’s import bill, estimated at around 23% based on March 2026 data, making consumption reduction the only sustainable lever.
He pointed to past experience: when fuel prices were raised in an earlier period, consumption fell by about 13%, showing a direct link between pricing and usage. Maintaining subsidies, he warned, sustains high consumption and worsens dollar outflows, which have risen from around $200 million a month to $300 million, $400 million and $500 million in successive months.
A persistent shortage of dollars, Fernando said, would lead to further rupee depreciation, which in turn would push fuel prices higher again — a self-reinforcing cycle that becomes difficult to reverse.
The Advocata framing adds a fifth analytical voice on the rupee/fuel nexus this week, alongside SJB MP Harsha de Silva’s “frozen market” critique, Deputy Finance Minister Anil Jayantha’s pushback, Deputy Industries Minister Chathuranga Abeysinghe’s “$6.3bn reserves” reassurance, and the Rs.521 million May CPC oil bill disclosure. It also lands the same week the rupee recovered to Rs.329 spot after weeks of slide.
Source: NewsFirst.
