The Cabinet has approved a new fuel pricing formula that will allow multiple price revisions within a single month, moving away from the current monthly review system to track global oil price movements more closely, the Sunday Times reported on Sunday.
Under the new mechanism, fuel prices will be adjusted on a weekly basis in line with global market trends, ensuring domestic pump prices reflect international crude and refined product movements with minimal delay. The specific formula details and implementation date were not disclosed.
The approval is a concrete step beyond the automatic tariff framework announced on April 8 by Deputy Finance Minister Dr. Anil Jayantha Fernando, who said the government was designing a formula-based system to replace ad-hoc pricing decisions. That announcement outlined the policy direction; Saturday’s Cabinet decision gives it formal authorisation.
The shift comes as Sri Lanka navigates extreme fuel price volatility driven by the Middle East energy crisis and the uncertain status of the US-Iran ceasefire. Oil prices have swung sharply in both directions since February, making monthly reviews inadequate for managing the fiscal exposure of state-owned Ceylon Petroleum Corporation.
The IMF has consistently pushed Sri Lanka towards cost-reflective energy pricing as a condition of its programme. A weekly adjustment mechanism would bring Sri Lanka closer to the market-linked pricing used in regional peers like India, where fuel prices are revised daily based on a 15-day rolling average.
The Rs. 100 diesel subsidy and the QR-based rationing system remain in effect alongside the new formula.
