The Hon. Anura Kumara Dissanayake - President, Minister of Defence; Minister of Finance, Planning and Economic Development; and Minister of Digital Economy

¶ 01 Mr. Speaker, amid the current war-related global situation, several sectors in our country are under strain. Our responsibility is to focus on those areas and launch a relief programme.

¶ 02 Two approaches were considered regarding key cost drivers—fuel, electricity and gas. One is full cost-reflective pricing, which would protect the Treasury, Ceylon Petroleum Corporation (CPC) and the CEB but burden the economy and the public. The other is to provide targeted relief. We sought a balance.

¶ 03 If we move to full market-linked prices in May based on prior-month data, diesel could exceed Rs. 600 per litre, including the Rs. 50 excise duty. Some propose removing that duty; that only cuts Rs. 50. Instead, we will retain existing taxes but grant a Treasury subsidy per litre: Rs. 100 for diesel and Rs. 20 for petrol, for three months. This will cost about Rs. 20 billion per month (Rs. 60 billion for three months).

¶ 04 Hon. Kabir Hashim suggested targeting. In principle, we agree relief should be targeted. However, due to practical data constraints, we will instead allow super diesel and super petrol to be fully market-priced (users generally do not need subsidies) while applying the per-litre subsidy across regular grades. We also considered whether to subsidize only certain vehicle types (e.g., three-wheelers), but cannot reliably operationalize that now.

¶ 05 For fishers, in addition to the Rs. 100 general diesel subsidy, we will provide Rs. 50 per litre relief for regular engine boats, up to 25 litres per day for 25 days (625 litres per month), credited to their bank accounts—Rs. 31,250 per month for three months. For multi‑day boats, once per trip within the three months, an Rs. 150,000 fuel grant.

¶ 06 On fertilizer, specifically urea: we had 14,000 MT at old prices in government stocks, and private firms agreed initially to release 60 percent to Agrarian Service Centres at old prices and later agreed to release all old-priced stocks. That suffices for two cycles of paddy; for the third, prices from new imports (USD 680–850/MT) may rise. We will procure from firms and supply urea at a fixed Rs. 10,200 per bag for the Yala season, absorbing about Rs. 3,000 per bag—around Rs. 1.7 billion total.

¶ 07 Further, we will increase targeted agrarian support: - Paddy: increase the fertilizer support from Rs. 25,000 to Rs. 30,000. - Other Yala field crops: increase from Rs. 15,000 to Rs. 18,000. - Smallholders in tea: an additional one‑time Rs. 5,000 per fertilizer bag on top of the existing Rs. 4,000.

¶ 08 Total additional fertilizer support will be about Rs. 6 billion to Rs. 6.5 billion.

¶ 09 For low-income households identified via the Aswesuma programme (despite imperfections, the best current proxy), for April only: - Raise Rs. 17,500 tier to Rs. 25,000 (+Rs. 7,500), - Rs. 10,000 to Rs. 15,000 (+Rs. 5,000), - Transitional beneficiaries by +Rs. 2,500. This costs about Rs. 8.5 billion for April.

¶ 10 On electricity, pressures stem from lower hydro reservoir levels, higher costs for furnace oil, naphtha and diesel, and coal quality shortfalls reducing output. Crude oil cargoes from the Middle East were delayed; refinery shutdowns require imported furnace oil at higher cost, and switching some plants to diesel raises generation costs.

¶ 11 Coal quality: We do independent lab tests pre-loading, pay 80 percent upon passing, and re-test in India (lab selected in 2023). Some cargoes failed; for those, we withheld the balance 20 percent and are imposing penalties (e.g., reducing USD 40/ton from USD 98/ton base in one instance). Any incremental cost from under-spec coal will be recovered from suppliers—not passed to consumers.

¶ 12 The April 1 tariff change was based on the February decision, not these newer shocks. For the next adjustment, for customers using under 90 units, we will provide a subsidy of Rs. 500 million per month for three months (Rs. 1.5 billion total). Of an estimated Rs. 32 billion incremental cost over three months, Government will absorb about Rs. 15 billion, about Rs. 7 billion will be recovered from coal contractors via penalties/withholds, and roughly Rs. 10 billion (about one-third) will enter the tariff—sharing the burden between Government, consumers and suppliers.

¶ 13 We will fund a three‑month relief package of Rs. 100 billion without new borrowing or money creation, within the Budget—thus not increasing money supply, public debt, or pushing interest rates/inflation. We target policy rates below 10 percent and inflation below 5 percent. Fuel import costs could rise by USD 1.5 billion (Apr–Dec) if consumption remains high; therefore, we also urge conservation to reduce this added forex burden closer to USD 1.0 billion.

¶ 14 On gas (LPG): supply continuity is feasible, but shipping and insurance premiums have spiked. A March 17 diesel tender saw premiums at USD 4.58/barrel versus the usual USD 2–3, reflecting risk. Similar effects apply to LPG, but we expect to maintain supply. In downstream fuels, the market is partly open (super grades fully market-priced). CPC holds about 57 percent share; we must manage price gaps to avoid unsustainable losses at CPC.

¶ 15 External financing and reserves: We are in advanced, productive discussions with the IMF. We aim to sign a Staff-Level Agreement this Thursday, securing both the 5th and 6th tranches together—about USD 700 million before end‑May. The ADB President and team have visited; approximately USD 1.2 billion is expected this year. World Bank support is also under discussion. The Central Bank purchased USD 700 million from the market in Jan–Feb, taking reserves near USD 7 billion; though some decline is expected with debt service in May, IMF/ADB inflows should stabilize reserves. Compared internationally, currency depreciation here remains milder than in many peers facing the same global shock.

¶ 16 On fuel continuity, we have coordinated with India—Prime Minister Narendra Modi has agreed in principle to support diesel and petrol supplies—as well as with China and Russia on energy, gas, coal and fertilizer. We are also navigating banking and sanctions‑related constraints in global transactions.

¶ 17 Our immediate plan spans three months for fuel, electricity and fertilizer support. If conditions worsen, we will return to Parliament with further proposals.

¶ 18 Thank you.