The Petroleum Dealers’ Association has reached out to President and Finance Minister Anura Kumara Dissanayake, requesting his assistance regarding alterations to the method used for calculating fuel dealer commissions and the subsequent reduction in commission payments. In their correspondence, the Association expressed that they felt compelled to bring this issue to the President’s attention after unsuccessful attempts to address the matter with relevant authorities, including the Ceylon Petroleum Corporation (CPC).
The Association emphasized that nearly 98% of fuel dealers operate as individual or partnership businesses, many of which have been established over generations, with only a small fraction having historical ties to political affiliations. The letter indicated that CPC issued Circular No. 1109 on February 25, 2025, which introduced a new commission calculation methodology that took effect on March 1, 2025. This new system replaced the longstanding percentage-based commission framework with a tiered structure that caps earnings per litre within a predetermined range.
According to the Association, the revised commission structure has led to inadequate income for dealers, making it challenging to cover staff salaries, repay loans, and manage other essential operational costs associated with running filling stations. Many operators, especially those burdened with existing bank loans, are struggling to meet their financial commitments. The Association cautioned that if the current commission framework remains unchanged, a considerable number of cooperative-run fuel stations could potentially shut down, jeopardizing both employment opportunities and local supply chains. Additionally, the Association pointed out that the new commission system was implemented without prior consultation and suggested that early dialogue with industry stakeholders could have led to a more effective and sustainable approach.
Beyond the immediate issues presented, industry stakeholders have raised concerns about a more extensive structural imbalance within the fuel pricing system. While dealer earnings are now restricted to a narrow range, the Ceylon Petroleum Corporation operates a cost-recovery pricing model that integrates its expenses into the final retail price. This model allows CPC to maintain flexibility in its profit margins, whereas dealers are required to manage all operational costs within a limited income framework. This situation is particularly challenging for CPC dealers. In contrast, dealers representing private companies in Sri Lanka continue to earn a percentage of the sales price, typically around 3%, which offers them a more viable and adaptable income stream. It is particularly disheartening that the state-owned CPC, which is expected to prioritize public welfare, has not provided a comparable arrangement, while private, profit-driven entities seem to be more attuned to the financial circumstances of their dealers.
The financial disparities are further evident in recent trends. Following the fuel shortages and losses experienced during the Sri Lankan economic crisis, CPC returned to profitability in the subsequent period. Meanwhile, fuel dealers saw only a slight and temporary increase in earnings under the previous percentage-based system, much of which was countered by rising costs and reduced sales volumes. Under the current fixed commission framework, dealers are discovering that their earnings are not sustainable over the long term.
Additionally, fuel dealers are tasked with collecting and remitting Value Added Tax (VAT) on a product whose pricing is determined centrally, which adds further administrative burdens and cash flow challenges to businesses that do not have control over pricing. Fuel purchases must be made on a cash basis, meaning that any increase in fuel prices directly impacts the working capital needed to operate a station. Consequently, dealers must invest substantial amounts of money simply to maintain fuel inventories, with this requirement escalating as prices rise. Nonetheless, the income generated per litre remains static. While the business may seem feasible on paper, in reality, dealers contend with high operational costs, loan obligations, and daily uncertainties. This situation necessitates greater capital investment just to sustain the same income level, raising significant concerns about long-term viability.
Industry stakeholders are warning that if these structural challenges are not addressed, the financial strain on dealers could worsen to the point where maintaining a consistent fuel supply becomes increasingly difficult. A continued lack of policy focus or reform could lead to a gradual deterioration of the dealer network, subsequently disrupting fuel availability for consumers nationwide. In its appeal to the President, the Association has requested the formation of an expert committee with considerable knowledge of the fuel distribution sector. They have recommended that representatives from the Association be included in this committee to assist in formulating a sustainable solution that is agreeable to all involved parties.
