The Government is skeptical of fully disclosing the cost-reflective fuel price formula under the current monthly revision due to possible misuse of fuel but is open to a fuller disclosure if or when a market determined daily revision comes into effect, The Sunday Observer reliably learns.
Addressing a press conference on Friday, Minister of Finance and Mass Media, Mangala Samaraweera said the variables included in the determination of domestic prices of petrol and diesel would be the price of crude oil (Singapore Platts FOB rate), value of the rupee against the US Dollar, distribution costs and percentage of taxes on fuel.
“The main purpose behind not revealing fuller details of the formula is to ensure that people do not misuse the transparency by hoarding stocks of fuel based on speculations which could then result in supply distortions and panic,” a top official of the Finance Ministry said.
Speaking on the condition of anonymity, the official said price revisions within shorter periods will therefore facilitate greater transparency of the formula and minimise shocks of price fluctuations to the ordinary citizens.
According to informed sources, the pricing formula is a simple mathematical calculation derived from adding the landing cost of fuel (determined by external factors such as the average of Singapore Platts plus weighted average of premium charges during the revision period and conversion factor of monthly average of exchange rate during revision period), operating cost and taxation.
“These external factors are uncontrollable external factors. The only change being made is the taxation rates that take into account the economic situation of the country. The taxation structure applicable on petroleum is also available in the Annual Report of the Ministry of Finance and Mass Media,” the source noted.
Posting a message on social media, State Minister of National Policies and Economic Affairs, Dr. Harsha de Silva last week emphasised that the fuel formula should not be politicised. The five member committee appointed to review fuel prices monthly consist of the Deputy Secretary to the Treasury, Secretary to the Ministry of Petroleum Resources Development, Representative of the Ceylon Petroleum Corporation, Director General of the Department of Fiscal Policy (Ministry of Finance) and Director General of Public Enterprises (Ministry of Finance).
“There is no need for politicians to sit on a Committee to decide prices. There is a formula and that should determine the price. Not everything has to be politicised. That IS the problem in this country. More frequent the adjustment, better it is,” the Minister said in a post on Twitter.
Meanwhile, Product Lead at Frontier Research (Pvt) Ltd, Nirukthi Kariyawasam said the list of countries undertaking a price formula to determine fuel prices at present include (but is not limited to) India, Pakistan and Nepal in South Asia and China, Malaysia, Indonesia, Philippines and Vietnam in South East Asia.
“But looking at each of these countries, they administrate prices very differently. For example in the Philippines, an independent board – the Energy Regulation Commission is tasked with implementing revisions. The whole idea is that they make revisions based on the changes in the global oil prices rather than any adhoc changes as required by the political parties or leaders,” she pointed out.