Petroleum Minister A. H. M. Fowzie says it is too soon to reduce domestic petroleum prices until world market prices moderate to a stable range. "Prices are still volatile and we don’t want to reduce prices yet until we can be sure world prices will remain at the low levels they are today," he told the Island Financial Review. He said, however, that he hoped to revise prices within three weeks time if not the 2009 budget is expected to propose a downward revision when it comes up for debate in parliament in November. "At the moment we are making a profit of about Rs. 6 to a litre and this is not a significant benefit we can pass on to the people. We have to be able to make a significant downward revision if we are to demand reductions in transportation costs and other related prices that are affected by oil prices," Fowzie said. "If we reduce prices now we would lose what little profits we are making at the moment," he said. Chairman of the Ceylon Petroleum Corporation Ashantha De Mel said that prices can only be revised when the 2009 budget is passed. "The government subsidized fuel for the first eight months of the year and we made a Rs. 23 billion loss, so we cannot immediately reduce prices unless the government says so in the budget," de Mel told the Island Financial Review. He said that oil prices are expected to increase in coming months. The Asian Development Bank said last month that oil prices, peaking at US $ 148 a barrel earlier this year, currently below US$ 95, is expected to remain high and volatile. "The recent drop in oil prices will be short lived," the multilateral bank said. When the government decided to cut fuel subsidies Naoko Ishii, Country Manager, World Bank commended the decision to do so. "The decision was extremely difficult but if it was not done it could have lead to a widening of the fiscal deficit which would lead to an increase in public debt and taxation," she said at the Sri Lanka Economic Summit organised by the Ceylon Chamber of Commerce earlier this year. Economists believe that subsidies should be removed as it tended to benefit those who did not need it, while such benefits are better targeted to those who do. The fuel subsidy benefited the rich who could afford vehicles at the expense of the poor.p "The annual consumption of fuel is about 2,500 million litres and out of this public transport and freight accounts for only 800 million litres. The balance is consumed by private vehicles," Prof Kamal S. Kumarage, Chairman, National Transport Commission (NTC), told the Island Financial Review earlier this year. Targeting welfare and subsidies to those who need them is an issue in this country. Consider for example the Samurdhi programme, a welfare programme designed to take people out of poverty. The Central Bank Annual Report 2007 says that previously about 40 percent of the population received Samurdhi relief although the existing poverty level is around 15.2 percent. A new selection process was adopted in 2007, but the Central Bank says that an estimated 38 percent received welfare benefits. The total allocation for the Samurdhi programme in 2007 was about Rs. 9.6 billion. In 2006 it was about Rs. 12.1 billion and averaged around Rs. 10 billion a year since 2002. "Given the high budgetary cost of the programme, it is necessary to link the poor to properly designed safety ropes programmes to enable them to exit poverty. "It is time now to revisit the Samurdhi programme with improving it on the basis of the ultimate goal of eradicating poverty," the Central Bank said. Fertilizer subsidies to farmers are also criticized for not reaching the farmers directly. While the government spends on education, health, subsidies and welfare they are not sufficiently targeted to those who need them the most. Sixty percent of the population received some stipend from the budget allocations in the form of subsidies or welfare, Dr. R. M. K. Ratnayake, Secretary, Ministry of Trade and Marketing Development, Cooperative and Consumer services, said at the annual sessions of the Sri Lanka Economic Association last month. "This is wasteful and the public ought to debate these issues. They seem to be afraid to talk about these things," he said. |
