Sri Lanka sees backlash against market pricing of expensive, polluting diesel
ECONOMYNEXT – Sri Lanka’s move to cut the price of petrol below that of diesel moving away from long term policy of mis-pricing diesel which is more expensive to import than petrol, has drawn fire from passenger transport operators in the country.
Due to a long term policy of under-pricing more expensive diesel compared to petrol most public transport and goods transport vehicle use the more expensive and polluting fuel instead of the cheaper petrol in Sri Lanka and many low inflation countries.
On September 30 the Singapore price of refined petrol was 90.2 US dollars a barrel compared to 112.34 a barrel. Kerosene – which is similar to jet fuel was 113.44 dollars a barrel.
In lower inflation countries like the UK petrol is now priced at around 160 pence a litre and diesel 180 pence.
In Sri Lanka people also bought diesel powered vans and pick-up trucks for private transport instead of petrol vehicles when the diesel mis-pricing was even greater some years back.
There is backlash against the decision by owners of large diesel vehicles.
“From public transport to food transport and essential services, all vehicles that carry bulk loads use diesel. Diesel has more of an impact on the economy compared to petrol,” said Gemunu Wijeratne, Chairman of the Lanka Private Bus Owners Association said criticizing the market-pricing of diesel.
“A stupid, unfortunate decision was made by reducing the price of petrol when the economy is driven by diesel.”
Wijeratne said he believed Sri Lanka could have contained runaway inflation if the authorities had opted for a revision in diesel prices instead.
In Sri Lanka and other third world countries with high inflation politicians and bureaucrats also believe that believe that inflation is caused by petroleum rather than the central bank.
However years of under-pricing diesel has not made Sri Lanka a low inflation country, since it is a monetary phenomenon.
Sri Lanka’s inflation started to rocket in from late 2021 after two years of money printing, even when fuel prices were fixed. After 2015 inflation picked up amid liquidity injection even when global oil prices and domestic oil prices were cut.
Sri Lanka’s nation-wide inflation rose to 70.2 percent in August 2022 accelerating from 66.7 percent a month earlier, data from the state statistics office showed.
Sri Lanka’s state-run Ceylon Petroleum Corporation (CPC) sells 92 Octane petrol at 450 rupees a litre, while 95 Octane is sold at 540 rupees. Lanka auto diesel goes for 430 rupees a litre, while super diesel is sold for 510 rupees.
Meanwhile, office transport drivers who operate private coaches ferrying office workers in Colombo told EconomyNext that there is some stability due to unchanged prices which have resulted in more consistent passengers.
“Earlier when there were constant price revisions, there were only increments and people were leaving the bus. We prefer diesel being higher than petrol in that sense but a decrease was anticipated,” said one office transport driver.
Sri Lanka’s All Ceylon Inter-Provincial School Van Transporters Association said in a statement that, if diesel prices had been lowered to level with petrol, transporting costs would have been lowered.
One parent said: “Van drivers will talk, but never do it. When the cost of fuel increases they are the first to shout. They say they will decrease when diesel decreases but they never reduced their fees, so having diesel at the same market price benefits us.” (Colombo/Oc03/2022)
