CPC’s massive diesel loss in May is a procurement problem, not a price problem.
2026-06-26
This blog post was produced in collaboration with Publicfinance.lk and is hosted on both websites. It draws on FactCheck.lk’s recent assessment of a claim made by President Anura Kumara Dissanayake, available here: President on CPC’s diesel loss: Correct numbers, incomplete diagnosis – FactCheck
With the June fuel price update now out, it is worth reflecting on the May 2026 update — the month that produced the sharpest gap between what the Ceylon Petroleum Corporation (CPC) said diesel costs and what the global market said it should cost.
In May, diesel consumers were told the CPC would need LKR 650 on top of the government’s LKR 100 subsidy to recover the cost of selling a litre of diesel. On that basis, the LKR 392 retail price looked unsustainable and a source of heavy losses. But applying the Singapore benchmark prices to the fuel-pricing formula showed a different result. Based on that figure, the CPC, on the same basis, should have needed only about LKR 451 per litre — not LKR 650 — to recover the cost of selling a litre of diesel.
What explains the near LKR 200 gap between what CPC claimed to be the cost recovery price and the actual cost recovery price calculated upon the world market price of diesel?
The explanation is in CPC’s procurement process.
What did the fuel formula show in May?
The May 2026 Fuel Price Tracker takes the Singapore benchmark price and runs it through the fuel pricing formula the Ministry of Finance introduced in 2018. That puts the cost of a litre of diesel, after taxes and subsidies, at LKR 451. At a retail price of LKR 392, this implied a loss of about LKR 59 per litre.
Yet this is not the figure the CPC reported. Both CPC’s May 2026 price notification — published by the Ministry of Energy — and the President’s public statements cite a higher cost. The Ministry of Energy’s breakdown is based on what CPC actually paid to import the fuel. The extra LKR 200 that is claimed as cost is due to the extra that was paid above world market prices for procurement.
What were the world market prices and how much more did CPC pay?
World Market Prices and how they fluctuated
In April 2026, the Singapore benchmark price for diesel averaged about USD 190 per barrel. For CPC’s cost to reach what it claimed, it would have had to procure diesel at about USD 268 per barrel — that is about 40 percent above the average world market price.
According to the Central Bank of Sri Lanka’s reporting, the Singapore benchmark exceeded USD 268 per barrel only briefly, on 2 April and 6 April 2026 (April 3rd data was not published). From 8 April onwards, it stayed below USD 200 per barrel on almost every trading day.
This suggests CPC’s reported cost did not reflect the market average. It reflects, possibly, procurement on peculiar days when prices were hugely above the average benchmark.
Why the fuel formula matters
Verité Research’s fuel price tracker on PublicFinance.lk is meant to provide information on the rational cost-recovery price. If CPC procures fuel at the global market price, the formula price calculates what it needs to recover its costs. The excess cost reported by CPC shows how much it spent to procure fuel above the global prices. This is a procurement loss, which responsible regulators would not normally allow to be passed on to consumers through higher retail prices.
Research by: Anushan Kapilan
Visualization by: Janith Sanjula
Sources
1. Verìté Research, Fuel Price Tracker — May 2026 update, https://dashboards.publicfinance.lk/fuel-price-tracker/ [accessed 27 May 2026].
2. Verìté Research / PublicFinance.lk, Fuel Price Formula: Revised Methodology (March 2025), https://dashboards.publicfinance.lk/fuel-price-tracker/wp-content/uploads/2025/03/Fuel-Price-Methodology.pdf [accessed 27 May 2026].
3. Newswire, “Diesel litre now costs Rs 720 — President AKD speaks on fuel situation,” 13 May 2026, https://www.newswire.lk/2026/05/13/diesel-litre-now-costs-rs-720-president-akd-speaks-on-fuel-situ/ [accessed 27 May 2026].
4. Daily FT, “Joint Opposition Alliance seeks probe into diesel procurement deal, alleges irregularities and losses,” https://www.ft.lk/opinion/Joint-Opposition-Alliance-seeks-probe-into-diesel-procurement-deal-alleges-irregularities-and-losses/14-791338 [accessed 27 May 2026].
5. Ceylon Petroleum Corporation, Marketing & Sales — Current Retail Prices, https://ceypetco.gov.lk/marketing-sales/ [accessed 27 May 2026].
6. Ministry of Energy, Price Applicable for May 2026, https://energymin.gov.lk/wp-content/uploads/2026/05/Price-Applicable-for-May-2026.pdf [accessed 27 May 2026].
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