By Ranjith Jayasundera
The very same Ceylon Petroleum Corporation
(CPC) that sent our fuel prices through the
roof last week was described as recently as
January 2007 by then SLFP MP Wijeyadasa
Rajapakshe as a "monster devouring public
The MP was presenting the report of the
Committee on Public Enterprises (COPE),
which found that the CPC had sold a Rs. 2.4
billion asset, Lanka Marine Services
Limited, for Rs. 1 billion, alleging that
"there had been a lot of corruption" in that
The CPC has, over the last several years,
been a profit making state institution. The
Corporation posted a profit of Rs. 4.9
billion in 2003, which fell in 2004 to
Rs.3.9 billion. The CPC bounced back from
this relative slump to turn a Rs. 7.7
billion profit in 2005.
Within one year of Chinthana the CPC posted
a loss in 2006, of Rs.1.5 billion. It
managed to recover its losses with a net
profit of Rs. 2.7 billion in 2007, despite
claiming to subsidise its fuel prices. What
it would appear is being subsidised in the
CPC, at least in the eyes of the former COPE
chairman, is corruption and bureaucracy.
Given that the CPC posted total profits of
Rs. 17.7 billion rupees between 2003 and
2007, and was callous enough to sell a
Rs.2.4 billion asset for Rs.1 billion, it is
difficult to believe that the government is
hard pressed to maintain its fuel subsidies
unless there is some other sector to which
money is being diverted, such as waging war
in the Wanni at a cost of over Rs.160
billion this year.
Back to the CPC. The Corporation has been
showing a clearly established pattern of
dealing with problems only after they have
exploded in full force, with little sensible
future planning. An example of this was when
Petroleum Minister A.H.M. Fowzie announced
that the CPC had accumulated losses of up to
Rs. 7.3 billion in 2008 as of April 15.
After this staggering and unprecedented loss
had been incurred - not before - the CPC
decided to take measures to cut "unnecessary
costs" according to Minister Fowzie. One
such way to save money, he said, was to
import crude oil for refinement in large
quantities instead of in small batches, to
take advantage of discounted pricing.
The Minister said that this would save money
on shipping and other costs, as opposed to
"placing irregular orders, which is
expensive." No explanation was offered as to
why the CPC did not place bulk orders in the
CPC Chairman Asantha de Mel also said in
April that the Petroleum Corporation managed
to earn US$ 7 million by hedging its raw oil
with Citibank and Standard Chartered Bank to
make up for losses in selling refined
products for less than the value of the
From the recent price increases, it is
obvious that no benefit of the CPC's cost
saving measures such as hedging, its
dealings with oil giant Trafigura, and
buying oil in bulk, is being passed on to
Another telling indicator of mismanagement
at the CPC was that the Lanka Indian Oil
Company (LIOC) posted profits of Rs. 2.3
billion for 2007, only Rs.400 million less
than those posted by the CPC, despite CPC
running twice as many pumping stations as
LIOC does, and engaging in refining
It is understandable however that the
Petroleum Corporation itself is not in a
position to bear the losses of providing
further subsidies to stabilise fuel prices,
even if its house were in order. Such
subsidies would ultimately have to be
provided by the Treasury, which itself is
burdened with soaring government
While the government cannot spare money to
subsidise fuel for its people in line with
the policies of nearly all other SAARC
nations, it has managed to spare over three
billion rupees to squander on Mihin Lanka,
war, and maintaining the world's largest
cabinet of ministers.
With further price hikes in fuel slated to
be in the offing, it would be interesting to
see what measures the government will take
to alleviate the effect of its price hikes
on an already desperate and disgusted
Farmer organisations pick up cudgels with
By Nirmala Kannangara
The government's intention to cut down the
fertiliser subsidy has come under severe
criticism by farmer organisations throughout
General Secretary, Eksath Udara Lanka
Jathika Govi Peramuna (EULJGP), Priyanka
Dheerasinghe says that the government's
intention was first to prune the fertiliser
subsidy and later withdraw it completely.
"All the promises pledged in the Mahinda
Chinthana prior to the presidential election
were mere words and pruning the fertiliser
subsidy too is part of the broken promises,"
Dheerasinghe told The Sunday Leader.
Plan to increase
Picking holes in the government's plan to
increase the price of a bag of fertiliser to
Rs.1,200 Dheerasinghe said that the
government fooled the paddy farmers in order
to get their support in the run up to the
presidential election in 2005.
According to Dheerasinghe, the paddy farmers
had faith in Rajapakse and did not believe
what the UNP Leader said about the
"When President Rajapakse promised to
provide fertiliser at Rs.350 the UNP said
that it was not practical and promised to
provide production concessions. Although,
UNP Leader Ranil Wickremesinghe correctly
said that the promises pledged by the UPFA
could not be fulfilled and that it was only
eyewash, the people believed Rajapakse,"
Dheerasinghe further accused the government
of supplying a bag of fertiliser at a lower
weight and said that the Ceylon Fertiliser
Company was therefore able to sell more than
1000 tonnes of subsidised fertiliser to
"When this was highlighted the chairman was
removed immediately but still the officers
who had a hand in this fraudulent and
underhand deal are free. Although the
promised bag of fertiliser should contain
50kg the farmers have complained that there
was only 30-35kg in these bags,"
Dheerasinghe alleged. According to
Dheerasinghe, it was not only the prices of
fertiliser but also the production costs
that include pesticides, machinery, labour
and fuel that compelled paddy farmers to
"Before coming to power Rajapakse promised
to put a halt to the suicides, but later
when these cases of suicide by farmers were
reported the Rajapakse administration
quickly said that those suicides were not
related to farming but were due to personal
issues. In the future too if the paddy
farmers commit suicide the government will
say that they are due to personal issues,"
Meanwhile, accusing the government of
failing to provide subsidised fertiliser to
large-scale paddy farmers in Anuradhapura,
Polonnaruwa, Ampara, Hambantota, Kurunegala
and all other paddy farming districts in
time, the EULJGP said that the delay had
resulted in a poor yield in the farming
regions during the past few seasons.
"The government has failed to provide the
necessary fertiliser in time which resulted
in a very poor yield. This also had put the
farmers in a quandary. If as the government
claims they had given the fertiliser subsidy
then the farmers would have produced a
bumper paddy harvest and the price of rice
would have come down considerably,"
Accusing Agriculture Minister Maithripala
Sirisena of extending his support to his
brother, Dudley Sirisena to sell rice stocks
to Prima for poultry feed, Dheerasinghe
further charged that unlike the previous
regimes, the Rajapakse administration was
always working to protect its supporters and
not the general public.
"It was Deputy Minister Siripala Gamlath and
Dudley Sirisena who suggested to the
government to sell its paddy stock to Prima
at a better price and this resulted in a
severe shortage of rice in the country,"
According to Dheerasinghe, the two
government backed paddy mill owners have
purchased the last Yala crop at Rs.16 per kg
and had sold it to Prima at Rs.25.
"During the UNP regime in 2002-2004 the
country produced an excessive harvest and
the people were requested to consume rice
for all three meals in order to save foreign
exchange on wheat flour but the Rajapakse
policy was completely different to that of
the UNP's. Instead of protecting the general
public the government has allowed its
political stooges to make money by
facilitating the export of rice at a higher
price and thereby passing the burden
directly to the general public," added
He also said that in 2003 the country
produced a bumper harvest due to the then
UNP government's focus on increasing the
Bumper crop in 2003
"In 2001 the country produced only 2.6
million mt. tonnes while 2.8 million mt.
tonnes were produced in 2002. It was in 2003
that the country had a bumper stock of 3.04
million mt. tonnes of paddy. During that
period the then government gave its fullest
support to increase production but did not
provide a fertiliser subsidy. That is why
the Wickremesinghe government was able to
increase production," Dheerasinghe pointed
However, Consumer Affairs Minister Bandula
Gunawardena told The Sunday Leader that the
government has no intention of pruning the
fertiliser subsidy but since the paddy
farmers have had their income increased by
100% due to the high selling prices compared
to previous years they have requested the
government to increase the fertiliser prices
to avert any losses to the government.
"Although the price of fertiliser has gone
up alarmingly, the government has no
intention of cutting down the fertiliser
subsidy. In 2003, a 50kg bag of fertiliser
was sold for Rs.850 but President Mahinda
Rajapakse was able to give a 50kg bag for
only Rs.350 as promised. At that time a
metric tonne was priced at Rs.12,000 in the
market but now it has shot up to Rs.66,000,"
According to Gunawardena, the farming
community has benefited immensely from the
UPFA government adding that in order to
strengthen the hands of President Rajapakse
the farmers have given their consent for a
fertiliser price hike.
Farmers promote hike?
"Earlier the farmers received only
Rs.10-Rs.17 for a kilo of paddy but now they
get more than Rs.30 which is a 100%
increase. So in that backdrop the farmers
have decided to request the government to
increase fertiliser prices," Gunawardena
However, when question on the allegations
levelled against the government by the
farming community that farmers representing
one political party do not get fertiliser at
the correct time and that they also get
30-35kg bags instead of a 50kg bag Minister
Gunawardena denied these allegations. He
said that it was the work of the opposition
parties to bring the government to
"I vehemently refute the charges but it is
Minister Maithripala Sirisena who can give
you the accurate statistics," he added.
All attempts by The Sunday Leader to contact
Agriculture Minister Maithripala Sirisena
and JVP Parliamentarian S. K. Subasinghe,
Sri Lanka has highest fuel prices in S. Asia
Price comparison of India, Pakistan and Sri
Lanka fuel prices (we're the highest)
The claims arising from all quarters of
government that Sri Lanka's fuel price woes
are in line with crises faced by other
neighbouring nations ring hollow when a
comparison is made on the ground realities
of all South East Asian countries.
India, Pakistan, Malaysia, Indonesia and
Myanmar all enjoy lower fuel prices than Sri
The energy crisis has impacted negatively on
First World countries in Europe and North
America - where gas guzzling SUVs and other
luxury vehicles are a common sight and also
where most families maintain a number of
vehicles with each member owning his/her own
Petrol and diesel prices in Pakistan and
India are at present between 27%-31% lower
than the price in Sri Lanka.
If you take your mind back to Myanmar's
riots of last September when an
international uproar followed in the wake of
that government slaughtering a group of
protesting Buddhist monks - the turmoil seen
then was primarily due to the crippling
impact on its economy when a 100% increase
in the price of diesel was imposed - from a
'phenomenal' Rs.32 per litre to an
'unbearable' Rs.64 per litre.
Clapped out excuse
The rise in world oil prices - the standard
excuse for all the price hikes in Sri Lanka
- has been steady since the late 1990s.
Given the unprecedented price increases
throughout 2007, the government's finance
managers did not consider it prudent to take
appropriate measures to cushion the impact
these hikes would have on the public when
presenting the 2008 budget - a timely step
that other Asian countries took.
While heavily subsidising the price of fuel
is not prudent monetary policy, allowing the
price of diesel to virtually double, from
Rs.67 a litre this time last year, and
jacking up petrol prices by one third - a
litre cost Rs.106 in May 2007 - is just
asking for an economic disaster.
Other Asian countries having foreseen such
price hikes have been prudent in maintaining
their subsidies in order to protect not only
their people but their burgeoning economies
The Bangladeshi government bears the burden
of a US$730 million subsidy and the Indian
government absorbs losses in the range of
US$16 billion in order to protect their
economy and the populace.
Keeping prices stable
Even Vietnam has subsidies of over US$620
million per year in order to keep fuel
prices from crippling that country's
industry oriented economy.
The Indonesian and Malaysian governments
absorb losses of over US$4 billion annually
in order to keep their fuel prices stable.
These countries have the alternative of
scrapping their subsidies and allowing
prices of fuel to fluctuate with market
rates, which will save them billions of
dollars. But the manner in which they have
managed their subsidies shows the extent to
which they are willing to go to protect
their tiger economies.
Consumer Affairs Minister Bandula
Gunawardena's statement on Thursday that Sri
Lanka is facing an economic crisis shared by
the entire region sounds ludicrous
considering that the rest of the region is
actually doing something about it and
helping its people.
There is no doubt that there is a crisis
throughout the world but Sri Lanka is alone
in South Asia in that the performance of its
economic managers - compared with those in
the region has been found severely wanting.
Perhaps the Sri Lankan government feels that
the money saved is more valuable than the
effect of stifling inflation and protecting
the economy. Perhaps the government feels
that the economy is in such a dismal state
that it is not worth protecting.
More likely our fiscal decision makers
wouldn't know what sound economic policy is
even if it stung them where it hurts most.
Country heading for spiral inflation
Mahinda Rajapakse and Nivard Cabraal
By Mandana Ismail Abeywickrema
The most recent fuel price hike that has had
a cascading effect on the prices of other
consumer goods is now pushing the country
towards spiral inflation.
According to the Central Bank, price
increases in fuel in the local market
usually have the effect of a 2-2.5% increase
in inflation, which on Friday reached an all
time high of 26.2%. The New Colombo
Consumers' Price Index (CCPI(N)) was
recorded at 26.2% for May. It was recorded
at 25% in April.
Interestingly, the Census and Statistics
Department has been "requested" by the
Finance Ministry and the Central Bank to
completely scrap the old CCPI, which
recorded an inflation rate of 29.9% in
Although the government worked to scrap the
CCPI that showed actual inflation, the rate
of 26.2% was yet the highest to be recorded
in the region.
The sustained increase in inflation and the
cost of living have now created the
possibility of the country experiencing the
economic phenomenon known as 'spiral wage
Economist, Dr. Harsha de Silva explained
that a high cost of living always prompts an
agitation campaign by the working class for
a wage hike, which wage hike in turn causes
another round of price increases and drives
inflation further skyward.
He observed that the government and
especially the Central Bank's inability to
contain the level of inflation have made the
bank's explanations on the present crisis
irrelevant in the eyes of the public.
"The people who have seen the continuous
increase in the level of inflation have now
decided the only way to face the situation
is to demand a wage hike, which is only fair
from their point of view given the high
prices of essential commodities," he
The government's one time ally, the JVP has
now warned of continuous agitation campaigns
calling for an increase in salaries in the
public, private and estate sectors.
JVP Parliamentarian and trade union wing
leader, K.D. Lalkantha has said that the
country has recorded the highest increase in
the cost of living index between 2005 and
2007, since President Mahinda Rajapakse
He says that the cost of living has
increased to such a level that a minimum
Rs.30,885 a month is required to maintain a
"The index has gone up by 2000 points since
the Rajapakse regime came to power. If Rs.
2.20 is given to each point the salaries of
public servants should be increased by Rs.
5,000 a month," he has said.
Lalkantha has warned that the JVP would
mobilise the masses to win these demands and
said that the months of June and July would
be decisive months for the working masses as
their struggle to increase wages would
intensify during this period.
However, with the working class agitating
for a wage increase given the increase in
the cost of living and inflation that has
been intensified by the increase in fuel
prices, Dr. de Silva warns that such a
scenario would push the country into a
dangerous cycle of spiral inflation.
He noted that the working masses couldn't be
blamed for spiraling wage inflation if it
takes place since it would be once again the
result of the government's weak monetary
policies which are not the fault of workers.
Be that as it may, neither the government
nor the Central Bank has so far been able to
In fact, the Central Bank said in its
Monetary Policy Review for the month of May
that inflation would be higher than targeted
in 2008 since the monetary authority found
it difficult to counter the pressure from
rising prices, especially oil.
"In these circumstances, there is a strong
likelihood of the actual 2008 inflation
figure being significantly higher than the
previous estimates which were computed on
the basis of crude oil prices during the
year 2008 being at an annual average of
around US$90," the Bank said.
The Bank further said that the continuous
rise in international commodity and oil
prices as well as domestic supply
constraints, caused a higher than expected
increase in inflation during the month.
Since November 2005 the country has
'achieved' a sky-high cost of living and a
level of inflation unmatched by any other
country in Asia.
The government that has so far failed to fix
all that is going wrong has only managed to
trot out statistics and juggle around
indexes that give low figures.
However, the increasing level of inflation
continues to be a burning issue.
Analysts have also identified several
reasons as to the cause of the rapid rise in
inflation. Some of these include rising
public expenditure (including for defence),
increasing dependence on domestic borrowing
by the government, depreciation of the
rupee, rising world market prices for
commodities (such as crude oil, wheat and
milk powder), rising indirect taxes and
suppression of interest rates.
Of all the predictions made by the Central
Bank for this year, at least one has so far
remained true. The sustained increase in the
country's rate of inflation, which has now
Earlier in the year, the Central Bank had
predicted 'high, double digit inflation' for
the first half of this year saying inflation
would be between 16% and 20%.
The Central Bank's prediction cast serious
doubts over the bank's ability to achieve
the initially set inflation target for 2008
of 10 to 11%. The bank then attributed the
upward movement in inflation since mid 2007,
to the removal of the fuel subsidy and the
increase in prices of imported food items.
It was also said that the pass-through of
international price increases would have a
favourable impact on containing inflation in
the long term.
Nevertheless, the government as always
blamed high oil prices to cover up its
inability to contain the level of inflation.
The government has said it was a global
problem as huge amounts of money were being
spent on oil imports, resulting in 'imported
SL badly affected
Interestingly, it is Sri Lanka that seems to
be the most badly affected country in the
Economists have argued that although global
oil prices do have an impact on inflation,
it was not as much as the government has
made it out to be, and have blamed bad
financial management and the printing of
money to meet rising government expenditure
as key factors contributing to the problem.
They say that global prices do not have an
impact on the level of inflation to the
extent the government makes it out to be,
especially since other countries in the
South Asian region, which are also affected
by the same high global prices, have managed
to maintain single digit inflation.
Also, a special study paper prepared by the
IMF titled Pass-Through Of External Shocks
To Inflation In Sri Lanka, states that most
of the country's inflation was not
'imported' or caused by oil. According to
the study: "Since late 2006, Sri Lanka's
inflation has increased sharply relative to
other economies in the region," and "the
sharp increase in inflation compared to
other countries in Asia points out that
increases in oil prices in the recent past
(a common shock to most economies in the
region) cannot explain most of the increase
in inflation in Sri Lanka."
The study has shown that oil prices
explained only 6% of the inflation in 2006
and 2007 when measured by the CCPI (N).
"With external shocks not playing a major
role in influencing domestic inflation,
domestic policies can be very important in
containing inflation," the study paper has
"External shocks appear to explain about 25
percent of the variation in consumer prices
and about 32 percent of the variation in
core inflation, suggesting that other shocks
that are likely more domestic in nature
explain most of the variation in inflation
in Sri Lanka." Dr. de Silva says that the
impact of oil prices is now being felt than
earlier as the supposedly 'one time
increase' now happens on a frequent level.
However, he says that although every country
feels the impact, it is only Sri Lanka that
has recorded a very high inflation level of
In this backdrop, it is important to
recognise that there are more internal
shocks that have had an impact on the
country's inflation level more than external
According to Dr. de Silva, the only way to
address the present situation was to tighten
monetary policy. "Monetary polices are at
the bottom of this whole crisis," he said.
Dr. de Silva, who has always called for the
tightening of monetary policies said that
the argument is now much stronger.
"There is no space now. You have to be very
careful," he said.
"The government needs to cut down the
wastage of funds and expenses have to be
made as lean as possible," he warned.
He explained that Sri Lanka has to
understand that although the food and oil
prices were beyond the control of any
government, other countries have managed to
maintain much lower inflation levels than
Although the Central Bank initially
dismissed calls for the need to further
tighten monetary policies and revise its
reserve money target, it finally made the
necessary adjustments after the inflation
level reached 26.2% in May.
The Bank said that in a bid to contain
inflation, it has decided to further
restrict its quarterly targets for reserve
money through a downward revision for the
remaining three quarters of 2008. "The
slower growth path envisaged in the revised
reserve money targets would also, in turn,
curtail the expansion of the broad money
supply further, thereby containing the
demand driven component of inflation,
ultimately containing further inflationary
"The Bank will continue to monitor
developments carefully and may revise
reserve money targets during the second half
of 2008 as deemed necessary based on
developments in inflation and real growth,"
the Bank said.
Dr. de Silva earlier said that the Central
Bank's reserve money targets were incorrect
and had the institution paid closer
attention to constructive criticism, the
level of inflation could have been contained
to an extent.
"The country's growth was predicted to be
7.5% by the Central Bank and a certain
amount of money was allocated to facilitate
growth based on that figure. However, the
growth was less than that, but the reserve
money targets were not revised accordingly.
This move caused inflation to increase
further," he explained.
However, he noted that this was the best
time for the government to push for reforms.
"The government has no money and is calling
for funds through bonds and Treasury Bills.
This is the ideal time to move for reforms,"
The argument that the Central Bank needs to
assert its role in building the country's
economy and not work towards the survival of
the government in power has become more
vocal with the sustained increase in the
country's inflation level. The
irresponsibility of governance has to be
changed and reforms need to be brought in,
is the call that is gaining momentum.
The heavy politicisation of the Central Bank
under the Rajapakse administration has been
cited regularly as the main reason for its
failure to act on its primary objective. In
2002, the Monetary Law Act was amended to
ensure the independence of the Monetary
Board of the Central Bank. The independence
was to give the bank the strength to say
"no" to the government of the day in order
to stand by its primary objective of
Governance issues have hampered the
independent functions of the bank. Three
members of the five member Monetary Board of
the Central Bank have to be appointed by the
Constitutional Council, which is now defunct
due to the President not appointing the
With the Central Bank unable to perform its
primary objective due to politicisation, the
country's economy is in peril and the lack
of direction and economic mismanagement by
the government is only aggravating the slide
towards economic ruin.
Another raise soon — UNP
The government is planning to increase
fuel prices further, the main opposition
UNP Parliamentarian Ravi Karunanayake
told the media last week that the
government would make another fuel price
adjustment in the next few days.
He explained that the recent price
increase was made according to fuel
purchases made at US$ 104 a barrel. "Now
that the price has increased to US$ 130,
the government would definitely increase
fuel prices in line with it," he said.
The Rajapakse legacy
The high inflation and high cost of
living experienced by the country has
made many opposition politicians speak
of the ‘Mahinda Rajapakse legacy.’
Following are "several historic
achievements" of the Rajapakse
administration pointed out by members of
the opposition at different occasions:
1. Highest ever level of inflation
and the highest in Asia.
2. An unprecedented increase in the
cost of living.
3. The highest ever fuel price hike
in Sri Lanka’s history
4. Maintaining the world’s largest
cabinet of ministers.
5. Maintains the only airline in the
world without any aircraft.
Food crisis hitting north-east
Vulnerable groups cutting down on meals -
Cutting down on meals has begun
Rice prices have risen steadily
in the last year
By Amantha Perera
Sri Lankans prefer to sit on tinderboxes;
they pride themselves on getting through the
rough not only unscathed but possibly with
gains. The sitting on the tinderbox ploy has
worked for some but left the majority in the
Onto the list of tinderboxes add the latest
- the food crisis. Sky rocketing prices,
high inflation and possible shortages are
very real these days. It was just in April
when rice sacks disappeared from grocery
stores and the supermarkets when the
government imposed price controls.
Supermarkets announced that they were
selling only Basmathi rice at Rs.190 per
kilo. Everyone is talking of rising prices
and with last week's midnight fuel price
hikes, the pinch became even more potent.
While Colombo, the richest district in the
country, may still feel insulated of the
brewing crisis, there is no denying that
people are cutting down, sometimes even on
essential needs to survive for the day.
"If we fall sick, there will be problems,
because we don't have enough money left to
spend on food and medicine," Munnianddy, an
office aide at Leader Publications said. "As
things are its better to fall dead, than
The poor are feeling the heat. Daily wage
earners like Munnianddy are the worst off.
Agencies working with vulnerable
populations, not only in the north- east but
elsewhere in the country also warn that
cutting down on transportation, education
and health are inevitable.
Last week evidence emerged that meals have
been limited or curtailed among the most
vulnerable groups - those who depend on food
aid, a World Food Programme (WFP) rapid
"WFP's rapid survey of beneficiaries shows
average expenses of 63% of income on food -
an increase from 52% last year. Some 93% of
the households adopt unsustainable coping
mechanisms like reducing meal size, skipping
meals, eating less preferred food,
borrowing, and selling assets," a WFP Hot
Spots report said last week. The survey was
carried out in eight districts and was part
of a plan to keep donors abreast of the
With further price revisions on fuel last
week, it is only a matter of time that
cutting down spreads upwards through the
lower wage earners in the country.
Food makes up the single, largest component
on the monthly budget of Sri Lankans. The
latest Household Income and Expenditure
Survey 2006/2007 by the Department of Census
and Statistics says that it is 37.6% of the
total expenditure which translates to
Rs.8,641 on average.
"According to the survey the mean per capita
consumption of rice is reported as 9.0kg.
That indicates that a person needs 108kg of
rice per year," the report said.
Sri Lankans spent 18.4% on housing, 13% on
transport, 7.2% on fuel and lighting, 6.8%
on personal care/health and 4.4% on
education from their earnings. The survey
results that came out in February are for
end 2007. The spikes in prices and costs
have been tremendous since end-2007.
Between April 2007 and April 2008 rice
prices have increased by 46% to 109% with
the lowest being recorded by red rice while
others recorded price gains between 70% to
90%. Samba increased by 102% or from Rs.41
"Price in food exhibited the highest
positive index point change of 84.8," the
department said in its Consumers' Price
Index of the Colombo City report for end
April, adding, "the increase in the CCPI
for April, 2008 is mainly due to an increase
in prices of rice, Lactogen, salt, red
onions, coconut oil, most varieties of fresh
fish and dried fish, coconuts, eggs and most
varieties of vegetables."
In the last three months electricity rates,
fuel and bus fares have been increased.
The rise in food prices is also likely to
have a telling impact on the war affected
communities in the country in general, as
the WFP survey has found. Already there have
been warnings that daily wage earners will
be the hardest hit.
"Fishing restrictions affect the livelihoods
of residents in the northeastern districts,
while local agriculture has decreased due to
a lack of inputs. With few existing job
opportunities, fishing, farming and labourer
households have been unable to earn a
regular income to cover the costs of their
basic needs," the Central Emergency Relief
Fund that falls under UNOCHA said last week.
"The recent rise in food and fuel prices is
making life even harder for poor people
already struggling to cope with the effects
of war and internal violence," President,
International Red Cross/Red Crescent
Society, Jakob Kellenberger said, releasing
its Annual Report in Geneva last week.
The WFP in Colombo has said that it has
incurred an increase of over 50% in
procurement. A tonne of food that cost
US$500 at the beginning of the year is now
going at US$ 800.
The assessment was done before last week's
fuel price revisions and is now likely to
increase even further.
Cost of maintaining the world's biggest
By Nirmala Kannangara
With a record number of ministers in the
Mahinda Rajapakse government, Sri Lanka has
become the only country with a cabinet
minister for every 375,000 citizens, which
far exceeds that of other countries in the
world, a UNP parliamentarian said.
"If the government is really committed to
reducing fuel consumption why can't they set
an example by a minister using one vehicle
instead of 15-20 at a time," charged the
Since the perks of legislators have
increased tremendously The Sunday Leader
spoke to the Public Administration and Home
Affairs Ministry to ascertain how much the
government spends on maintaining the largest
cabinet in the world.
Sources from the Public Administration and
Home Affairs Ministry told The Sunday Leader
'off the record' that the vehicle usage of
ministers had increased dramaticaly over the
past two years.
"A cabinet minister, non-cabinet minister
and a deputy minister are entitled to two
official vehicles and two back-up security
vehicles. But in reality every minister uses
at least 10-15 vehicles apart from the
back-up vehicles. Although most of the
ministers use around 15 vehicles there have
been instances where some have used around
50-100 vehicles. If there are any security
threats to a certain minister then the
ministry has to provide adequate security
personnel, back-up vehicles and also
different types of vehicles as a
precautionary measure," the official added.
According to Ministry sources, all cabinet
ministers receive a basic salary of
Rs.65,000 a non-cabinet and deputy minister
receive Rs.63,500 and a parliamentarian
receives a basic salary of Rs.54,285. All of
them receive a host of additional
"Apart from the basic salary an allowance of
Rs.500 is paid for each parliamentary
sitting and Rs.200 for attending a Select
Committee meeting. Depending on how many
days they attend parliament sessions and
Select Committee meetings the allowances
vary and the final package that a
parliamentarian receives is more than
Rs.100,000 per month. Ministers and deputies
receive over Rs.130,000," he said.
Further, he said that every cabinet and
non-cabinet minister is entitled to a
monthly fuel allowance of Rs.75,000, a
deputy minister is entitled to Rs.50,000
and parliamentarians are entitled to
Rs.29,000 depending on the distance to his
constituency, before the recent price hike.
According to these sources, Rs.20,000 is
allowed for a private land phone and
Rs.10,000 for a mobile phone in addition to
unlimited local and IDD facilities for
official telephone lines every month.
Whims and fancies
On being questioned as to how much the
government allocates for each minister's
personal staff the sources said it depends
on how many people the minister absorbs into
his personnel staff.
"Sometimes ministers prefer to have their
personal drivers in addition to official
drivers. However, all are entitled to two
drivers but these rules change depending on
the number of vehicles. Most of the
ministers employ their kith and kin as their
private secretaries, coordinating
secretaries and public relations officers,"
In addition every cabinet, non-cabinet and
deputy minister is entitled to four
secretaries. They are all entitled to
official vehicles, fuel and telephone
allowances and a limited entertainment
Meanwhile, a senior official from the
Housing and Pensions Unit of the Public
Administration Ministry told The Sunday
Leader how houses are allocated to ministers
which varied from their rank and threats to
"A minister who holds a responsible
portfolio in government is given a residence
in a well secured area while the others are
given residence at the Summit Flats or even
in the heart of the city if he/she does not
have a house in Colombo or the suburbs," the
senior officer said. He added that the
government spends Rs.100,000 on an official
residence for a minister.
It was revealed that ministers deploy their
security to their private residence when
they are not occupying it. "This is against
government rules," an official said. Those
who occupy the Summit Flats pay Rs.6,000
while occupants in Madiwela and Colombo 7
pay Rs.2,900 and Rs.8,000 respectively, as
According to the sources, the electricity
and water bills too are borne by the
respective ministries which means that all
106 ministers are living in the lap of
luxury, thanks to the downtrodden rate
payers' hard earned money.
Nation bleeding ministers
Wastage of public funds amounting to
billions of rupees has further deepened
the financial crisis faced by the
One such instance where public funds are
being wasted was revealed in parliament
Leader of the House, Health Minister
Nimal Siripala de Silva responding to a
question raised by JVP Parliamentarian
Ranaweera Pathirana, told parliament
that the six Nation Building Ministers
were using 43 vehicles, incurring a
staggering monthly fuel bill of
According to de Silva, the ministers
using these vehicles were Jagath
Pushpakumara, Susantha Punchinilame,
Saliya Dissanayake, Rohitha
Abeygunawardene, S.M. Chandrasena and
Each minister is paid a monthly fuel
allowance of Rs.17,500 per vehicle.
Knock-on effect of fuel price hike
By Nirmala Kannangara
The recent increase in fuel prices has had a
cascading effect impacting on the prices of
all consumer goods, The Sunday Leader
learns. The fuel price hike is expected to
bring an increase in electricity tariffs as
The Ceylon Electricity Board (CEB), which
increased its tariff by 40% a month ago, is
currently consulting the Finance Ministry on
measures to avert losses in case tariffs are
not revised. If the Treasury fails to grant
the CEB a subsidy it would have no option
but to increase its rates. Power and Energy
Minister John Seneviratne told The Sunday
Leader that discussions with the Finance
Ministry are in progress in this regard.
"The CEB depends a lot on thermal power
generation. Although the fuel price hike has
badly affected thermal power generation we
have not yet decided whether or not to
increase the tariff. The Power and Energy
Ministry is in touch with the Finance
Ministry to obtain some relief," added
Seneviratne. He said the CEB has no
intention of putting more burdens on the
consumers adding that he expected to receive
a fuel subsidy for the CEB.
"The government does not want to burden the
masses and we expect to get a fuel subsidy
to keep the same tariff. But it depends on
the outcome of the discussion," Seneviratne
said. "We can't forecast future outcomes,"
Naphtha sold out
The Jathika Sevaka Sangamaya (JSS), CEB
branch told The Sunday Leader that the
government's failure to use low cost naphtha
oil as a substitute for diesel to generate
cheaper electricity would result in another
tariff revision in the near future. "The
Ceylon Petroleum Corporation (CPC) sold its
naphtha stock to a foreign country at a
cheaper rate due to lack of storage
facilities at Sapugaskanda. The government's
failure to generate low cost electricity
from naphtha oil led the CEB to increase
tariffs by 40%. With the latest fuel price
hike a tariff revision would compel people
to go back to the stone age," charged the
According to JSS sources, CPC, despite
expert advice, had sold out its entire
naphtha stock at Rs.35 per litre in 2007 due
to lack of storage facilities and is instead
using diesel to generate power at double the
According to experts, four electricity units
could be generated from a litre of diesel
whereas 5.5 units could be generated from a
litre of naphtha. If naphtha was used
billions of rupees could have been saved and
consumers would have been the beneficiaries,
it was pointed out.
Meanwhile private bus fares too were
increased with effect from May 27 by 27.2%
while the Sri Lanka Transport Board
increased fares by 17%. The Railway
increased fares by 7% from last week adding
to the escalating CoL.
Compelled to increase
"In the past we increased prices once a year
but since the government kept on increasing
fuel prices and also the prices of tyres,
tubes and spare parts we urged the
government to allow a fare revision every
six months. As a result we were able to
increase fares once in six months. Since the
government increased the prices of diesel
and petrol by Rs.30 we requested for the
first time, to permit an increase in bus
fares immediately or face the consequences,"
President, Private Bus Owners Association (PBOA),
Gemunu Wijeratne told The Sunday Leader.
The Keells and Cargills supermarket chains
told The Sunday Leader that there is a need
for them to revise their prices.
"We were compelled to increase prices with
the electricity tariff revision. Now with
the fuel price hike there is no option but
to increase prices to cover our costs," they
Cargills said that the fuel price hike would
compel them to increase their prices. "Our
prices would still be the cheapest despite
the increases. We bring fresh vegetables and
fruits from the peripheries. So our fuel
consumption is high. But we don't want to
burden our customers unfairly other than to
cover up our expenses marginally," they
Keells too said that the electricity tariff
revision introduced a month ago has had an
adverse impact on its business. If there
were a further electricity price hike, "we
would have no option but to go for yet
another price increase," Keells sources
The All Island Three Wheeler Drivers
Association told The Sunday Leader that
trishaw charges too had increased following
the price hike. "We were badly affected due
to the fuel price hike as people now opt to
travel by bus. According to our members
their daily turnover has gone down
considerably. People now travel in trishaws
only in an emergency," they said.
Meanwhile, the government's failure to
implement the Petroleum Resources Act No. 26
of 2003 has resulted in the unprecedented
fuel price hike, Jathika Sevaka Sangamaya,
Petroleum Branch (JSSPB) said.
The Petroleum Resources Act No. 26 of 2003
and the Special Regulation on Petroleum
Products No. 33 of 2002 clearly states that
a regulator should be appointed to monitor
all petroleum products to regulate prices
and the standard of all petroleum products.
But the government's failure to abide by
these laws has resulted in the present fuel
price hikes, the JSSPB alleged.
"If there is a regulator to monitor
petroleum products the general public would
benefit through low cost fuel and gas. The
regulator would have the authority to find
out how much fuel and gas companies spend to
purchase their products and how much the
cost of imports would be. Once the expenses
are calculated and the government's
recommended profit is added, the regulator
can fix the price. But now the government
increases fuel prices according to its own
whims and fancies to cover up other losses
and the power of revising gas prices has
been vested with the Consumer Affairs
Authority," JSS Secretary Ananda Palitha
told The Sunday Leader.
According to Palitha, the CEB, police and
the three armed forces, SriLankan Airlines,
Mihin Lanka, CGR, SLTB, Lanka Electricity
Company and government ministries owe the
CPC several billion rupees.
"It was the Treasury that instructed CPC to
release fuel to these institutions on credit
and President Rajapakse as Finance Minister
ordered these government institutions to pay
CPC. Earlier the government boasted that the
Treasury would absorb the losses incurred by
the fuel subsidy to the CEB for thermal
power generation without passing the burden
to consumers. But the Treasury's failure to
pay CPC its dues has resulted in huge
increases in fuel prices to cover up these
losses," Ananda charged.