📈 Fuel Subsidy Benefits Skewed Toward Top 30% Income Cohort

Advocata Institute CEO Dhananath Fernando warns that Sri Lanka’s current fuel pricing and rationing are unsustainable, highlighting a significant imbalance in national consumption. • Consumption Patterns: The top 30% of income earners consume 70% of total fuel, while the poorest 70% of the population account for only 30% of consumption. • Pricing Gap: Despite a recent 25% price hike due to Middle East tensions, prices remain below cost-reflective levels. Based on provisional data, petrol may need an additional Rs. 100/litre increase and diesel Rs. 200/litre to match market conditions. • Policy Recommendations: • Move beyond QR-based rationing toward market-driven price signals. • Remove price caps to encourage the 40 private companies newly licensed to import fuel. • Implement targeted social safety nets for vulnerable segments rather than broad subsidies. • Economic Risks: Failure to adjust could lead to broader strain on the balance of payments, tourism disruptions, and rising costs for the export sector.