CPC skirts main issue

Wednesday 6th November, 2024

The Ceylon Petroleum Corporation (CPC) has leapt to the defence of the JVP/NPP government, which is under fire for the latest fuel price revision. Only the prices of Octane 95 petrol and Super Diesel have been reduced much to the resentment of the ordinary people who use Octane 92 petrol and Auto Diesel.

CPC Chairman D. A. Rajakarauna has told the media that the CPC is no longer free to determine petroleum prices due to the presence of some foreign companies in the fuel retail market, where the current fuel pricing formula applies to all players alike mandatorily. The agreements Sri Lanka signed with those foreign firms under the previous dispensation have restricted the CPC’s independence; otherwise, the CPC would have been able to lower the prices of other fuel types as well, Rajakaruna has claimed.

The CPC Chairman’s argument smacks of a misrepresentation of facts about the impact of the aforesaid agreements; it is also self-defeating. His line of reasoning makes one wonder whether the JVP/NPP, which used to make ex cathedra assertions about fuel prices, which it promised to slash, was not aware of the agreements in question when it was in the Opposition. It claims to have a team of mavens, doesn’t it?

The CPC management has apparently sought to obfuscate the main issue and deflect the blame for the government’s failure to reduce fuel prices. It has chosen to leave something important unsaid about the fuel prices and the agreements under discussion; the foreign companies involved in fuel retailing will incur losses only in a situation where fuel prices are arbitrarily reduced while the petroleum taxes are kept at the existing level, the way governments did in the past for political reasons. The costs of all fuel types include government taxes. The NPP pledged to lower fuel prices by reducing petroleum taxes, didn’t it? If it had decreased the taxes, fuel prices could have been brought down through the pricing formula, and the foreign companies would not have suffered any losses.

The Opposition insists that taxes on a litre of Octane 92 petrol amount more than Rs. 150. Will the CPC panjandrums give cost breakdowns for all fuel types so that the public will know how much they pay by way of petroleum taxes? They should also publicise the controversial agreements.

There is no gainsaying that the current government or a future administration, for that matter, must not resort to anything that will stand in the way of the ongoing efforts to boost state revenue significantly. The JVP/NPP should have known better than to promise huge fuel price reductions. Some of the main causes of the current economic crisis were politically motivated tax and tariff reductions under the Gotabaya Rajapaksa government. The ongoing economic recovery programme would go pear-shaped if some of the NPP’s main election promises were implemented.

The government’s failure to carry out its pledge to reduce fuel prices substantially entails a considerable political cost, which the JVP/NPP needs like a hole in the head at this juncture. But there is hardly anything the government can do about it. The IMF has set revenue targets for Sri Lanka, and unless they are met, the next tranche of the extended fund facility will not be unlocked. Hence the need for all political parties to refrain from promising what they cannot deliver.

The NPP is not alone in having made promises that cannot be fulfilled. One wonders whether those who made them were really serious about honouring them. The SJB has also promised to renegotiate the IMF programme!

The energy sector agreements the CPC Chairman has reportedly frowned upon bolster arguments against involving foreign companies in large-scale power generation projects here. The entry of conglomerates such as Adani into the local power sector could lead to a situation where they will pursue profit maximisation ruthlessly, causing Sri Lanka to run the risk of facing the same fate as Bangladesh, which is now at the mercy of Adani Power. It will be interesting to see how the NPP and its rivals propose to tackle this issue, which is bound to affect Sri Lanka’s energy sovereignty?