ECONOMYNEXT – Ceylon Petroleum Corporation, a Sri Lankan state-owned company, lost Rs 57 billion through May 2021 as prices remained fixed and also due to exchange losses related to dollar loans, said the Minister of Petroleum, Udaya Gammanpila.
The current administration of Sri Lanka has abandoned under its manifesto “Saubhagyaye Dekma” the price formula which sought to balance the costs of inputs and outputs.
Retail prices were raised last month, after keeping them above global prices in 2020 when fuel prices fell, angering customers.
Fuel is a key source of taxes for most governments, and gasoline is generally the highest tax.
Minister Gammanpila said the recent price hike came when a barrel of oil was priced at $ 76.
“Now the price of gasoline is $ 83 (per barrel),” he told Parliament. “That’s an increase of over 10 percent.”
An excise tax is levied on fuel sold at retail, but the CPC refinery obtains crude tax-free, which represents a loss of revenue for the state and a tax subsidy for the CPC.
Minister Gammanpila said diesel prices had been increased by Rs 7 per liter but the cost was Rs 14 higher even then.
Kerosene was sold for 77 rupees per liter but cost 105 rupees, he said.
Heating oil received CEB at 70 rupees, but the cost of imported heating oil was 105 rupees, he said.
The cost of domestically produced heating oil was Rs 90, he said. The CPC refinery has been allowed to import crude tax free, but refined products are subject to import duties in addition to excise and other retail sales taxes.
Economists had warned that commodity prices would rise this year as the Federal Reserve prints money and America’s credit and money supply grew at a rate unprecedented since the last commodities and credit bubble triggered by the Fed.
Ceypetco suffers losses from rising costs as well as dollar loans taken in the past when the rupee depreciates, he said.
In 2020, CPC made a profit of Rs 2.371 billion after losing Rs 21.841 billion on forex.
“But last year’s profits are like a coconut sinking under the Kelani Bridge when you compare the losses now,” Minister Gammanpila said.
Gammapila said the CCP has borrowed in dollars since 1994.
Sri Lankan policymakers tend to force the CPC to borrow dollars whenever the central bank prints money and creates currency shortages.
CPC pays import bills with borrowed money and ends up with unhedged dollar exposure.
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There has been no investigation as to why state-owned enterprises are being forced to do so and no one has been jailed or punished for the colossal losses of CPC’s uncovered foreign exchange loans.
In 2018, despite a price formula, CPC “Yahapalanaya” recorded a loss of 82 billion rupees on forex, as money was printed to create currency shortages and the energy SOE borrowed more dollars. .
In 2019, as the exchange rate stabilized amid weak credit, it achieved an exchange gain of US $ 8.23 billion.
In 2020, the CPC recorded an operating profit of 39 billion rupees, Minister Gammanpila said. Taxes were increased in 2020 as oil prices fell. Il 2020 CPC again lost 21 billion rupees on the unhedged dollar exposure. (Colombo / July 10/2021)