Oct 18, Colombo: Sri Lanka's Finance Minister Mangala Samaraweera today reveled the recently introduced fuel price formula calculation method to media following repeated calls to know the formula.
At a press conference held in the Ministry of Finance today, the Minister explained that Maximum Retail Price of fuel is established as a sum of all the costs associated with the distribution of fuel.
The setup of Maximum Retail Price formula is shown below.
Introduction to the Formula Based Pricing System of Auto Fuels
1. Construction of Pricing Formula
The Cabinet of Ministers has granted approval for implementation of a cost reflective formula based pricing system of Auto Fuels effective from May 1 I. 2018.
The Pricing Formula was constructed by a technical Committee based following components of the supply of auto fuels
a) Landed Cost
b) Processing Cost
c) Administrative Cost
Accordingly, the Maximum Retail Price (MRP) of the auto fuels was established as follows:
MRP = V1 + V2 + V3 + V4
MRP = Maximum Retail Price of Auto Fuel
V1- Landed Cost (Rs. / Litre): Which includes Singapore Platts Price per Barrel. Weighted Average Premium per Barrel. Loss due to the Evaporation and Exchange Rate (USS)/I LKR are applied.
V2 - Processing Cost (Rs. / Litre) Which includes Local Port Charges. Transport Cost. Dealer's Margin including losses due to Evaporation to Dealers and Stockholding Cost
V3 - Administrative Cost (Rs./ Litre) Which includes Administrative Expenses including Personnel Cost. Depreciation, and other cost elements, if any.
V4 - Taxation (Rs. / Litre) Which includes Customs Import Duty. Excise Duty. Ports and Airports Development Levy and Nation Building Tax.
According to the above pricing formula, Singapore Platts per Barrel and Exchange Rate are two uncontrollable variables. Other components are either controllable variables or fixed components