July 6, 2018 / 11:39 AM / 9 months ago

UPDATE 1-Sri Lanka's Ceylon Petroleum rows back on fuel price increase

(Adds CPC decision to reverse price hike)

By Shihar Aneez

COLOMBO, July 6 (Reuters) - Sri Lankan state-run fuel retailer, Ceylon Petroleum Corp (CPC), has reversed an earlier decision to increase petrol and diesel prices at its fuel stations, a government official said, hours after the finance ministry demanded a hike to stem losses.

CPC and Lanka IOC, the only other local fuel retailer and a subsidiary of Indian Oil Corp, had raised the price of diesel by 8.3 percent to 118 rupees ($0.7417). Gasoline prices went up by around 5.8 percent.

However, hours after the announcement, CPC asked its fuel stations to reverse the price hike.

“The CPC has issued a circular asking its stations not to increase the prices as it is not in favour of a price hike,” Sudarshana Gunawardana, the director general at the government’s Information Department told Reuters.

CPC was not immediately available for comment.

According to the government regulations, the finance ministry has the authority to decide the fuel price. It can revise the pricing formula every two months.

Ali Hassen, director of information at the finance ministry, told Reuters that the finance ministry has been considering whether decide fuel rates on a weekly basis.

CPC has about two third of the island nation’s retail fuel market, while Lanka IOC has the rest.

CPC had been under pressure to increase its prices after incurring a loss of 9.9 billion rupees ($64 million) in the first two months of the year due to rising oil prices.

The government cut petrol prices in January 2015 after President Maithripala Sirisena was voted into office. It did not increase prices until May this year, fearing unpopularity among voters.

Under pressure from the International Monetary Fund to boost revenue, Sri Lanka increased excise duty on diesel by 10 rupees to 13 rupees per litre from August last year but asked fuel retailers not to pass on the cost to consumers. ($1 = 158.8000 Sri Lankan rupees) (Reporting by Shihar Aneez, editing by Louise Heavens)

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