Fuel dealers challenge CPC’s Rs. 36.4 bn profit, allege margin cuts and lack of pricing transparency

The Ceylon Petroleum Corporation (CPC) has come under scrutiny from fuel dealers, who have raised concerns over the reported Rs. 36.4 billion profit for 2025, as disclosed in the latest report of the Central Bank of Sri Lanka. The Petroleum Dealers’ Association has alleged that the profit figure includes revenue generated through what it describes as “unlawful deductions” from dealer margins implemented during 2025. According to the Association, since the establishment of CPC in 1961, fuel dealers, who serve as key stakeholders in the retail supply chain, have been entitled to a defined share of dealer margins. However, from 1 March 2025, CPC is alleged to have unilaterally reduced this share by more than half.

The Association said the move has significantly impacted 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. Fuel dealers also pointed to the Cabinet-approved pricing formula introduced on 29 November 2022 under reference No. 22/1876/604/076, which was designed 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% (around 3%) under the V2h component. Subsequently, the CPC Board of Directors, through Board Paper No. 27/1281 dated 16 August 2023, had reaffirmed the dealer margin at 3%. The Association noted that international oil companies continue to adhere to this structure, providing their dealers with a 3% margin based on the Maximum Retail Price (MRP), 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 1 March 2025. It claimed that this reduction was implemented unilaterally, with the deducted portion effectively absorbed into CPC’s profit.

According to audited financial statements for 2024, the Association pointed out that CPC’s profit was Rs. 34.2 billion. In this context, it questioned how the 2025 profit of Rs. 36.4 billion could be presented as a significant increase, suggesting that the figure may have been inflated through the inclusion of margins deducted from dealers. At the time of introducing the pricing formula, the Cabinet of Ministers had ensured that, for every price revision, the relevant line ministry published the applicable formula together with prevailing prices and the associated cost components. This practice was consistently followed up to September 2024. However, since October 2024, the pricing formula and its underlying cost details have not been published by the Ministry of Power and Energy Sri Lanka or by any other government authority at the time of price revisions. The Association said this lack of disclosure raises serious concerns regarding transparency, accountability, and the integrity of the decision-making process. In the absence of publicly available information, stakeholders are unable to verify whether pricing adjustments are being carried out in accordance with the originally approved formula. Given the importance of transparency in maintaining public trust, the Association has urged authorities to resume the regular publication of the pricing formula and its key components for each revision, while also calling for a review of the current pricing structure to ensure fairness and sustainability across the fuel distribution network.