Lanka raises fuel prices by 15%; to enlist foreign firms to ease shortages

Sri Lanka hiked fuel prices on Sunday, creating further pain for ordinary people as officials from the US arrived for talks aimed at alleviating the island’s dire economic crisis.

Ceylon Petroleum Corpor­tion (CPC) said it raised the price of diesel, used widely in public transport, by 15 percent to 460 rupees ($1.27) a litre while upping petrol 22 percent to 550 rupees ($1.52).

The announcement came a day after Energy Minister Kan­chana Wijesekera said there would be an indefinite delay in getting new shipments of oil.

Wijesekera said oil due last week had not turned up while shipments scheduled to arrive next week would also not reach Sri Lanka due to “banking” reasons.

Meanwhile, the island nation plans to allow foreign companies to distribute fuel in a bid to ease crippling shortages that have paralysed most economic activity as the island nation grapples with a sovereign debt crisis.

The government is preparing a cabinet paper that would allow for more fuel distributors, and is aiming for four new players — with foreign compa­nies permitted — to operate state-run Ceylon Petroleum’s filling stations, Wijesekera said. Currently only CPC and Indian Oil’s Sri Lanka unit are permitted to distribute fuel. 

The new distributors will be asked to import oil on credit, Wijesekera said. 

The island nation is in talks with the International Monetary Fund as well as bilateral creditors such as India and China for fresh funds to pay for imports after it defaulted on its dollar bonds earlier this year and saw foreign reserves dwindle. 

Sri Lanka needs $6 billion in the coming months to prop up its reserves, pay for ballooning import bills and stabilize its currency, which has fallen 43% against the dollar this year.

“Regret to inform that CPC has informed me that the suppliers that had confirmed petrol, diesel and crude oil shipments to arrive earlier this week and next week has communicated the inability to fulfill the deliveries on time for banking and logistical reasons,” Sri Lanka’s Power and Energy Minister Kanchana Wijesekera tweeted on Saturday.

The minister said that until the next shipments arrive, priority would be given in diverting the existing stocks to public transport, power generation and industries, while diesel and petrol would be distributed at limited filling stations throughout next week.