The prices of electricity and fuel may be increased soon following the government’s undertaking to the International Monetary Fund (IMF) to stop all Treasury subsidies to the Ceylon Electricity Board (CEB) and the Ceylon Petroleum Corporation (CPC) and to bring the two institutions to a break even position by 2011.

The government in its Letter of Intent (LoI) to the IMF outlining its programme when accepting the US$ 2.6 billion stand by facility from the Fund has said, "The government’s policy is to ensure that state owned commercial enterprises run efficiently and do not rely on subsidies from the Treasury.

Specifically, the aim is to ensure that Ceylon Electricity Board (CEB) and the Ceylon Petroleum Corporation (CPC) break even by end 2011."

An official from the CPC told The Sunday Leader that the current losses incurred by the CPC amount to approximately Rs. 65 billion including the outstanding dues from other state institutions.

The official stated that the only way to bring the institution to a break-even position was to increase fuel prices and to sell shares in the stock market.

Petroleum and Petroleum Resources Minister Fowzie told The Sunday Leader that although the Corporation was making a profit in the refinery, it was still incurring losses in fuel sales.

He also said the Treasury had stopped subsidising the CPC since August 2007.

However, when asked as to how the government planned to bring the CPC to a break even position by 2011 as stated in the LoI to the IMF, Fowzie said he was unaware of the government’s undertaking to the Fund.

"I am not aware of this clause in the IMF LoI. I was not even informed of such a move. I cannot comment on it without even seeing what has been said about the CPC," he said.

The other institution referred to by the government, the CEB, owes a sum of Rs. 42 billion to the CPC.

CEB authorities say that if the CPC stops providing fuel at subsidised rates to the CEB, there would be a necessity to increase electricity tariffs in order to be in a break-even position.

CEB Chairman, E.A.S.K. Edirisinghe told The Sunday Leader that he could not give any cash figures at the moment, because, if the present fuel prices and increase in hydropower generation continued, the CEB could record a cash neutral situation this year.

However, he said that if the CPC stopped providing subsidised furnace oil to the CEB, it may compel the Board to increase tariffs.

"But I think we would not have a problem. As I said, if the present conditions prevail, we will be able to record a cash neutral budget," he said.