The Sri Lankan government has announced a fuel price hike of approximately 25 percent, marking the second increase within a week. This decision is influenced by ongoing tensions in the West Asia region, which have significantly impacted global oil markets. The unrest follows joint military actions involving the United States and Israel against Iran, alongside retaliatory measures taken by Iran affecting the entirety of the Gulf area. This situation has led to the closure of the strategically vital Strait of Hormuz, which is critical for the global energy supply chain.

Specific Increases in Fuel Costs

Effective from midnight, the new fuel prices reflect drastic increases across various products. The price for auto diesel has surged by 26.1 percent, rising from 303 Sri Lankan rupees (LKR) to 382 LKR. Super diesel has increased by 25.5 percent, moving from 353 LKR to 443 LKR, while petrol pricing has also seen substantial increases; 92 octane petrol is now priced at 398 LKR, a 25.6 percent rise from 317 LKR, and 95 octane petrol has jumped by 24.7 percent to 455 LKR, up from 365 LKR. Kerosene has observed the most substantial increase, going up by 30.8 percent from 195 LKR to 255 LKR. This marks the latest of three price hikes since March 1.

Impact on Public Transport

The substantial rise in fuel prices has prompted warnings from non-state bus operators about significant disruptions in transportation services. Many operators have indicated that up to 90 percent of their buses may be off the roads due to these cost hikes. Gamunu Wijeratne, head of the private bus owners’ association, highlighted the severity of the situation, stating that without an appropriate revision of fare prices—which would need to be at least 15 percent—many bus services would become economically unviable. In response to these concerns, the Lanka Private Bus Owners’ Association has announced plans for a nationwide strike unless a formal fare revision is approved.

Potential Changes in Bus Fares

The National Transport Commission (NTC) has acknowledged that the latest increase in diesel prices would lead to a necessary adjustment of bus fares, suggesting a rise of more than 10 percent under their existing fare formula. NTC Director General Nilan Miranda mentioned that Cabinet approval for this fare adjustment is expected shortly. In Sri Lanka’s public transport sector, private operators hold a dominant market share of approximately 65-75 percent, while state-operated services account for only 25-35 percent of the fleet.

Challenges Faced by Taxi Operators

Operators of three-wheeled taxis, a popular mode of transport in Sri Lanka, have expressed concerns regarding the rising petrol costs, which have now reached nearly 400 LKR per litre. One operator questioned the viability of their business at these price levels, indicating a potential decline in demand for rides. The fuel retail market is comprised of various entities, including Ceylon Petroleum Corporation (CPC), Lanka IOC, Sinopec, and United Petroleum, all of which have revised prices in response to changes made by CPC.

Government’s Financial Burden

According to the opposition, the government is accruing significant tax revenues from fuel sales, earning LKR 119 for each litre of petrol and LKR 93 for diesel. Calls for a reduction or elimination of these taxes have been made to ease the financial burden on consumers. Additionally, analysts have projected that the latest round of price increases could result in an inflation rise ranging between 5 to 8 percent. Government spokesperson Nalinda Jayatissa noted that despite these increases, the government still incurs monthly costs of approximately LKR 20 billion in fuel subsidies, emphasizing the urgent need for revised pricing structures to mitigate further financial strain.

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