By The Pulseline News Desk
The government’s fuel subsidy programme is expected to come to an end after June, according to officials who appeared before the parliamentary Committee on Public Finance (COPF), sparking fresh concerns about the potential impact on fuel prices, production costs and the broader cost of living.
The disclosure was made during a recent meeting of COPF, where lawmakers sought clarification on the sustainability of the subsidy scheme and its implications for public finances.
Officials from the Ceylon Petroleum Corporation (CPC) told the committee that the subsidy introduced in April to cushion the impact of rising fuel costs, has provided significant financial support to fuel consumers. Under the current arrangement, the government contributes Rs. 100 for every litre of diesel sold and Rs. 20 per litre of petrol.
Explaining the rationale behind the subsidy, CPC Chairman D.J. Rajakaruna said that by April the Corporation was losing Rs. 129 on each litre of diesel sold. Treasury support covered Rs. 100 of that loss, leaving the CPC to absorb the remaining Rs. 29 per litre.
Despite these losses, Rajakaruna noted that earnings from refinery operations have helped offset the financial burden, allowing CPC to avoid an overall deficit.
However, questions arose over what would happen once the subsidy expires. Responding to committee members, Deputy Secretary to the Treasury A.K. Seneviratne said no decision had yet been taken to extend the programme beyond June.
The revelation prompted concern from Committee Chairman Harsha de Silva, who warned that inadequate fuel procurement management could have wider economic consequences. Rising fuel costs, he said, would inevitably increase transportation and production expenses, potentially leading to higher prices for goods and services across the economy.
De Silva also highlighted the substantial fiscal cost of the programme, noting that the subsidy package amounts to approximately Rs. 57 billion. While acknowledging the need to support vulnerable groups, he suggested that future assistance may be better targeted through the government’s Aswesuma welfare programme rather than through broad fuel subsidies.
“What is being suggested is that once the subsidy ends after June, direct support may no longer be available. If relief is required, it could be channelled through Aswesuma,” he said during the discussion.
The committee chairman further pointed out that if additional resources were needed to expand social welfare assistance, the government could seek parliamentary approval through a supplementary budget allocation.
Officials from the National Budget Department indicated that such options could be examined if circumstances warranted further intervention.
The discussion reflects the difficult balancing act facing policymakers as they seek to maintain fiscal discipline while protecting households and businesses from rising energy costs. With fuel prices influencing nearly every sector of the economy, the decision on whether to continue, modify or replace the subsidy scheme is likely to have significant implications for inflation, economic activity and public welfare in the months ahead.
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