Mangala reveals fuel price formula

Published : 9:16 am  October 19, 2018 | No comments so far |  | 


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By Yohan Perera   

Finance Minister Mangala Samaraweera yesterday revealed the fuel price formula finally after lobbying by opposition parties and questioning by the media for four months since its inception.   


“I promised to reveal the price formula some time back. This is a simple one. It is MRP= V1+V2+V3=MRP ( maximum retail price). This is what we used as the fuel price formula.” the Minister told a media briefing last afternoon.   
“The maximum retail price is computed using four components namely the landed cost, processing costs, administrative costs and taxation. V1 is landed costs per litre which includes Singapore Platts price per barrel, weighted average premium per barrel, loss due to the evaporation and exchange rates are applied in accordance with this component. V2 is processing costs which involve local port charges, transport costs, dealer’s margin including losses due to evaporation to dealers and stockholding cost per litre. V3 involves administrative expenses including personnel cost, depreciation and other costs elements per litre. V4 includes customs import duty, excise duty, ports and airports development levy and nation building tax per litre. This is the fuel price formula which the government had adopted,” the Minister said.   

Citing an example he said the price of a litre of petrol as at October 10, 2018 was Rs. 157.22. This was computed by adding landed cost of Rs 93.84,  processing cost Rs 5.87, administrative cost Rs 3.83 and taxation Rs 53.68.  Accordingly the price of a litre of petrol as at Ocrober 10 2018 was Rs 157.22.   

It was explained that Singapore platts price and exchange rates are uncontrollable variables. Others are either fixed or controllable variables.   

The Minister said almost all countries charge taxation including Saudi Arabia which manufactures fuel. Revenue collected from the tax is used to give concessions to the people.

 The tax rates are low in Sri Lanka. India charges a tax of Rs 82.14 per litre of petrol, Pakistan Rs 29.93, Sri Lankla 53.68, Singapore Rs 30.78 and UK Rs 178.70 per litre.   

Mr. Samaraweera said there a positive trend seems to have begun and therefore predicted stabilization of prices in the future. ‘ We have seen a positive trend lately as oil prices have declined by $ 5 a barrel as of yesterday. Price of a barrel of oil had gone down to $ 80 per barrel compared to earlier prices of $ 86. However things are uncertain as no one knows what the big man in America would do next. We hope that the trend would continue. We will reduce the prices when the global prices go down,” he said in this regard  

Asked how such a simple formula could spin his head as he mentioned before, Mr. Samaraweera said the computing and adjusting prices monthly is a complicated one.