Sri Lanka’s state oil company Ceypetco wants the government to raise fuel prices immediately and to maintain them for at least three months. It has submitted a proposal to the Treasury that the gasoline price be raised by Rs 8 to Rs 65 a litre, diesel by Rs 6 to Rs 32 a litre and kerosene by Rs 2 to Rs 27.50 a litre. (US$1=Rs100) .

The company has been pushing for a rise n retail since early this year when oil prices began rising on the world markets.

The government has so far refused, shielding consumers from the effects of rising oil prices on the world markets. Instead, the Treasury has extended a subsidy to Ceypetco and its Indian-owned rival, Lanka IOC.

As a result, the Treasury now owes Ceypetco Rs 6.5 billion and Lanka IOC Rs 1.5 billion in subsidy payments for the first half of the year. For Ceypetco, the subsidies cover 120 million litres of diesel sold each month for power generation, and 30 million litres of gasoline and 18 million litres of kerosene.

According to Lanka Business Online, the mounting fuel bill has slowed down the Sri Lanka oil industry’s reform programme.

The government is trying to tap the OPEC Fund for soft loans to fund a heavy import bill, which is tipped to rise from an average US$ 800 million a year to US$ 1.2 billion by year end.