Electricity rate hike likely as CPC ends subsidy, raises fuel prices

By the Editorial Team · Sunday, August 30, 2026

Sri Lanka’s Ceylon Petroleum Corporation has ended its three-month fuel subsidy, raising naphtha and heavy fuel oil prices by about 20 percent, which will likely lead to higher electricity tariffs. The National System Operator will propose new electricity rates in September to reflect these increased fuel costs, impacting consumer bills in the coming quarter.

Electricity consumers in Sri Lanka may face an increase in electricity tariffs following a rise in fuel prices and the end of a subsidy arrangement by the Ceylon Petroleum Corporation (CPC). The CPC raised the prices of naphtha and heavy fuel oil (HFO) by roughly 20 percent and ceased supplying these fuels to the power sector at subsidized rates.

The CPC informed the National System Operator (NSO), a successor company of the Ceylon Electricity Board (CEB), that the fixed-price fuel agreement established on April 18, 2026, to stabilize electricity prices for a three-month period has concluded. Following this, the price of HFO increased from Rs. 210 to Rs. 248 per litre, while naphtha prices rose from Rs. 174 to Rs. 210 per litre, according to CPC Managing Director Mayura Neththikumarage.

Naphtha is primarily used to power Electricity Generation Lanka’s 165-megawatt (MW) Kelanitissa combined-cycle power plant. HFO is utilized in several power plants including a 60 MW barge-mounted facility, the 160 MW Sapugaskanda power plant, and LTL Holdings’ 300 MW oil-fired combined-cycle Yugadanavi power station in Kerawalapitiya.

Dr. Neththikumarage explained that while fuel prices have been increasing since April, the CPC had maintained fixed prices without passing on the costs to consumers for three months. “We sold HFO and naphtha at a loss as the prices were fixed to maintain the electricity tariff,” he noted. That subsidized period ended on July 18, prompting a realignment of prices to reflect the current market rates. The CPC typically revises fuel prices on the fifth day of each month.

The NSO is scheduled to submit its fourth-quarter tariff revision proposal to the Public Utilities Commission of Sri Lanka (PUCSL) on September 4, 2026. NSO Chairman Pradeep Perera indicated that the increase in fuel prices will impact electricity generation costs. “The government had given a subsidy which ran out,” he said. “We are preparing the tariff for the October-December quarter, and we obviously have to take this into account. When the price goes up, the cost goes up. Thereafter, the PUCSL has to decide how to adjust the tariff to recover the cost.”

Meanwhile, the government is reportedly considering reinstating subsidies for petrol and diesel amid rising global oil prices triggered by tensions in the Gulf region. However, there has been no indication that subsidies for naphtha or HFO will be resumed, potentially affecting electricity generation costs further. A senior official noted that the government aims to shield consumers from bearing the full burden of fuel price increases, despite the lapse of the initial three-month subsidy package introduced in April.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.