Dec 01, Colombo: Sri Lankan government owned Ceylon Petroleum Corporation (CPC) is losing 2 billion rupees ($18 million) a year on diesel and kerosene imports due to the subsidies.

CPC, at present, is losing Rs.2.05 per litre on petrol and Rs.17 per litre on diesel in a bid to avoid burdening the consumer.

The government has temporarily suspended price increases of diesel and kerosene, and reduced VAT on gasoline, according to the budget.

Meanwhile the IMF has urged the government to cut fuel subsidies and raise fuel prices to avoid a backlash on economy and restore economic stability.

A report released by IMF on Wednesday said that the Ceylon Electricity Board (CEB) is also likely to incur financial losses of about 20 billion rupees in 2007, due primarily to the lack of adjustment in electricity tariffs, which have fallen well below cost recovery levels.