The Government is considering the introduction of fuel rationing or a fuel pricing formula in the face of skyrocketing oil prices while steps are being taken to cut energy consumption in state institutions, Finance Ministry and other official sources said.
Strict instructions have been issued to ministries, departments and institutions to utilize fuel only for essential official work, and directions given to reduce daily energy needs like cutting down on the use of air conditioners.
The Sunday Times reliably learns that a special committee including senior ministers and top officials is to be appointed to explore both options -- rationing of diesel and petrol and/or a (monthly) fuel pricing formula similar to what was practiced during the UNP-led government in 2002-2004. Then prices were fixed on a monthly basis based on international trends.
Economists say both steps which are inevitable given Sri Lanka's depleting foreign reserves and rising oil prices could see a further rise in inflation and the cost of living. Bread prices have risen by Rs. 5 a loaf, as have the prices of other essentials while milk food and gas companies are also pushing for a price hike.
The sources said the monthly pricing formula will help ease pressure on the state coffers owing to global fuel price fluctuations. The rationing scheme being considered is to provide a limited amount of subsidized fuel a month at a fixed price for motorists and a higher price for diesel or petrol purchased over the prescribed limit. There was no immediate information as to whether kerosene would also come under either scheme or would be exempt as it’s consumed mostly by low income groups.
The Finance Ministry in a February 16 circular says secretaries to ministries are responsible for using fuel/electricity in an efficient and cost effective manner. Issued by Treasury Secretary P.B. Jayasundara, it has highlighted the need to cut expenses due to increasing fuel prices. The circular says use of vehicles should be only for essential work. It has also advised state institutions to use air conditioners only from 10 am to 3 pm. The Ministry has also urged the public sector to reduce other costs like printing invitations for official functions.
When contacted, Petroleum Industries Minister Susil Premajayantha told the Sunday Times he was unaware of a move to consider a fuel rationing scheme. He said he believed there was no need to restrict the fuel consumption as Sri Lanka was purchasing crude oil from Iran and it is only 30% of the total fuel imports. “We are importing 70% of refined oil and if there is a problem we can import refined oil to meet the balance 30% requirement,” he said.
The minister said Sri Lanka would have to consider rationing only if there was a severe shortage of fuel in the world market. At the moment there was no such critical situation worldwide, he added.
The Government spent billions of rupees on its annual fuel bill and it was better to reduce this bill, he said.
Last year, the Government spent US$ 4.6 billion on fuel imports compared to $3 billion in 2010, according to the Central Bank which released the annual 2011 economic data on Friday.
The trade deficit, which is the negative difference between the value of imports and exports, has soared to a 100% increase in 2011 to $9.7 billion from $ 4.8 billion in 2010. Export earnings in 2011 were $10.48 billion while imports were double that at $ 20.2 billion.
As concern grew over rising fuel prices, Sri Lanka’s private sector was also cutting fuel consumption and rationalizing on costs but in some cases, like tourist hotels, not passing it to the consumer.
Ajit Gunawardene, Deputy Chairman at John Keells Holdings, said that while the group had been having a focused strategy of energy efficiency and conservation, the urgency to speed up these measures was getting more attention. “We have been re-looking at our targets and strategies in the context of the current oil crisis,” he said.
Hiran Cooray, Chairman of Jetwing Group, said the message had gone to all levels of the staff on the need to conserve fuel and improve energy efficiency. “We are not passing it (additional cost) to tourists and customers in hotels but would have to look at it again in the next few months,” he said.Samantha Kumarasinghe, Chairman of Multichemi Group, makers of Nature Secret cosmetics said the private sector needed to cut consumption in the best interest of the country. He said he had directed his company executives to limit their traveling till the situation improved.
Some private sector financial analysts believe fuel prices could ease as the severe winter in Europe and the US is tapering off.
http://www.sundaytimes.lk/120226/News/nws_01.html
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