Petroleum Dealers’ Assn. seeks review of fuel pricing formula and margin structure

Fuel dealers have challenged the reported Rs. 36.4 billion profits of the Ceylon Petroleum Corporation (CPC) for 2025, raising concerns over reduced dealer margins and the lack of transparency in fuel pricing. The figure was disclosed in the latest report of the Central Bank.

The Petroleum Dealers’ Association alleged that the profit includes revenue generated through what it described as “unlawful deductions” from dealer margins implemented during 2025. The Association noted that since the establishment of CPC in 1961, fuel dealers, as key stakeholders in the retail supply chain, have been entitled to a defined share of dealer margins. However, from March 1, 2025, CPC is alleged to have unilaterally reduced this share by more than half.

According to the Association, the move has significantly undermined the financial viability of dealers, making it increasingly difficult to sustain operations. It warned that nearly 200 cooperative fuel stations operating as CPC dealers, along with a considerable number of rural filling stations, are now at risk of closure.

The matter has reportedly been brought to the attention of the President. Dealers also referred to the Cabinet-approved pricing formula introduced on November 29, 2022, which aimed to facilitate the entry and stabilisation of international oil companies in Sri Lanka’s fuel market. Under this framework, oil companies were allocated a 4% (V6) profit margin and a 2% (V5) operational margin, while distributors were entitled to an operational margin of approximately 2.96% under the V2h component.

Subsequently, the CPC Board of Directors, through a board paper dated August 16, 2023, reaffirmed the dealer margin at 3%. The Association noted that international oil companies continue to adhere to this structure, providing dealers with a 3% margin based on the Maximum Retail Price, in line with contractual agreements.

However, the Association alleged that CPC’s current management reduced the dealer margin under the pricing formula from 3% to 1.5% with effect from March 1, 2025, with the deducted portion effectively absorbed into CPC’s profit.

Citing audited financial statements for 2024, the Association pointed out that CPC recorded a profit of Rs. 34.2 billion, and questioned how the 2025 figure of Rs. 36.4 billion could be presented as a significant increase, suggesting that the rise may have been driven by margin reductions imposed on dealers.

At the time of introducing the pricing formula, the Cabinet of Ministers had required the relevant line ministry to publish the formula, prevailing prices and cost components with each revision. This practice continued until September 2024. However, since October 2024, neither the Ministry of Power and Energy Sri Lanka nor any other authority has published the pricing formula or its underlying cost details alongside price revisions.

Emphasising the importance of transparency in maintaining public trust, the Association urged authorities to resume the regular publication of the pricing formula and its key components, and called for a review of the current pricing structure to ensure fairness and sustainability across the fuel distribution network.