Diesel price revision is needed soon, analyst Dhananath Fernando warns, saying failure to act could weaken the rupee and raise goods prices.
Diesel price increases may be unavoidable in the coming days, with economic analyst Dhananath Fernando warning that one litre should rise beyond Rs. 600.
Speaking on TV Derana’s “360” current affairs programme, Fernando said a major fuel price revision is necessary to bring local prices in line with global market rates.
He warned that if the government decides not to increase fuel prices, the direct consequence could be further depreciation of the rupee.
Fernando said a weaker rupee would not affect fuel prices alone, but would also push up the prices of other essential goods.
He said milk powder, sugar, gas, and many other daily necessities could become more expensive, worsening overall inflation and placing more pressure on households.
Fernando also argued that the government’s current fuel subsidy is informal and poorly targeted.
He noted that even wealthy individuals currently benefit from the subsidy.
Instead, he proposed a system of direct subsidies focused on poor communities and public transport services.
Fernando said a diesel subsidy based on the number of kilometres travelled by buses could help control increases in passenger fares.
Citing data, he said the current landing cost of fuel at the port is between Rs. 403 and Rs. 409.
He said selling a litre of diesel at Rs. 392 under these conditions creates a loss-making situation.
Fernando warned that continuing this policy in the long term could push the economy deeper into difficulty.
He also said analytical data shows that petrol prices should increase by at least around Rs. 20 to Rs. 30.
