Minister Wijesekera claims low profits with unaccountable version of the fuel price formula

Fact Check

This fact check is based on the minister’s recent tweet on the fuel price formula cost breakdown for a litre of petrol, diesel, and kerosene. The breakdown of the cost is meant to justify the price charged by the CPC for the following month. In his tweet, the minister claims the profit to the CPC is low with an unaccountable version of the fuel price formula.

To check the tweet, FactCheck.lk estimated the cost per litre using the fuel price formula implemented by the Ministry of Finance (MoF) in 2018 and other data published by the Central Bank of Sri Lanka (CBSL). In line with the MoF’s formula, FactCheck.lk used average Singapore Platts petrol and diesel prices from 1 to 28 March (see Exhibit 2). Data were available for 92-Octane Petrol and Auto Diesel only.

Exhibit 1 contrasts the minister’s estimates with the above figures. Based on the numbers computed by FactCheck.lk there is a profit of LKR 35 for petrol and LKR 49 for diesel.  However, the minister computes a profit of LKR 2 for petrol and LKR 0 for diesel.

The figures of the minister and FactCheck.lk vary mainly due to the minister using a higher cost than the Singapore Platts price. For example, in the case of 92-Octane Petrol, the minister claims the (the actual) cost is USD 107.3, whereas the Singapore Platts price is only USD 94 per barrel on average for March. The footnotes in the minister’s tweet mention that the petrol was discharged in November 2022. However, the average Singapore Platts price was even lower in November 2022, at USD 93. However, it is not inconceivable—though not verifiable—that government procurement could have been irregular and at higher than global prices.

The MoF formula assumes that the CPC should not be purchasing at a price higher than the global Singapore Platts spot prices. A previous fact-check has shown that the CPC has also purchased at a lower price than that within the last year (see https://bit.ly/3M51zeE). Therefore, a price higher than the Singapore Platts price has not been considered for the purpose of computing the accurate market cost on the MoF formula.

The minister has applied the methodology of the MoF fuel price formula in breaking down the costs. But he has failed to apply the Singapore Platts prices as the correct basis for computing the maximum cost. However, his footnotes indicate he is aware of the problem. Therefore, we classify his statement as PARTLY TRUE.

*FactCheck.lk’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck.lk will revisit the assessment.

Exhibit 1: Summary figures on petrol and diesel

Source: Central Bank of Sri Lanka

Exhibit 2: Detailed breakdown of FactCheck.lk’s estimate

Source: Central Bank of Sri Lanka