Sri Lanka has announced a three-month fuel subsidy as part of a Rs. 100 billion relief package, aimed at easing the burden on the public amid rising global energy costs. The move comes as fuel and energy sectors face increasing strain linked to the ongoing crisis in West Asia.
Under the scheme, the Sri Lankan government will provide a subsidy of up to Rs. 100 per litre of diesel and Rs. 20 per litre of petrol. The programme is expected to cost approximately Rs. 20 billion per month, with a total allocation of Rs. 60 billion over the three-month period.
Officials stated that without intervention, the price of diesel could exceed Rs. 600 per litre (almost twice the price as of early April) under a fully cost-reflective pricing model. Instead, the Sri Lankan government has opted to retain existing taxes while absorbing part of the cost through Treasury funding. The subsidy will apply to standard fuel categories, while super diesel and super petrol will continue to be priced at market rates.
Of the Rs. 100 billion relief package, a total of Rs. 60 billion is allocated for fuel subsidies. The remaining Rs. 40 billion is to be distributed across multiple sectors, including approximately Rs. 8 billion for consumer relief and around Rs. 15 billion for electricity subsidies, alongside further allocations for agriculture and fisheries.
Additional support has been extended to the fisheries sector, with a further Rs. 50 per litre subsidy provided to fishing vessels, alongside targeted allowances for multi-day operations. Owners of standard fishing boats are to receive a monthly fuel allowance of Rs. 31,250, calculated based on subsidised fuel usage over a fixed period. Multi-day fishing vessels, which operate on longer offshore cycles, are to be granted a lump sum allowance of Rs. 150,000 per voyage within the three-month window.
In the agricultural sector, the government has moved to stabilise fertiliser costs amid rising global prices. A bag of urea fertiliser will be maintained at a fixed price of Rs. 10,200, despite higher market rates, with the Sri Lankan state absorbing the difference. Fertiliser subsidies for paddy cultivation during the summer cultivation season ('Yala') have been increased from Rs. 25,000 to Rs. 30,000, while subsidies for other crops have been raised from Rs. 15,000 to Rs. 18,000. Tea smallholders are also included within the scheme, with an additional allowance of Rs. 5,000 per fertiliser bag introduced on top of an existing Rs. 4,000 subsidy.
At the household level, the Sri Lankan government has expanded payments under the 'Aswesuma' programme, which remains the primary mechanism for identifying low-income groups. Monthly allowances have been increased across all tiers, with the highest category rising from Rs. 17,500 to Rs. 25,000, while lower tiers have also seen an additional 50% increase. However, the structure of the subsidy raises questions over its effectiveness and equity. Government officials including the current president himself, have acknowledged that Sri Lanka lacks a sufficiently accurate data system to identify and target vulnerable groups, resulting in a broad, untargeted subsidy model.
