Sri Lanka's state-owned petroleum company has run out of cash, the country’s Energy Minister Udaya Gammanpila said, warning a severe fuel shortage is inevitable if tariffs aren’t increased or the government doesn’t provide another bailout. 

The warning, the first-ever admission of the scale of the crisis by a cabinet minister, came on Friday after the government failed to increases fuel prices despite high global fuel prices. State-owned Ceylon Petroleum Corporation (CPC) has been accruing huge losses for months. 

“Earlier, we were short of dollars to import oil. Now we don’t have the rupees to buy the dollars,” Gammanpila said on Friday, adding they could no longer afford to supply fuel. 

For over a year now, Sri Lanka remains gripped in multiple interlinked crises with the shortage of foreign exchange reserves at its core. Earlier, the government was struggling to procure enough supplies of food and medicines; now it is struggling is import fuel. 

The CPC, the energy minister said, suffered losses of up to 42 percent on the sale of diesel, one of the common fuels in the island country, at government-mandated prices, accruing a loss of whopping $415 million last year alone.

"Even if taxes are lifted on oil sales, it is not enough to cover our losses," he said. "A severe shortage is inevitable unless we increase prices or the treasury offers a bailout."

Several power plants have stopped operation as they run out of diesel. Power companies have already started enforcing scheduled power cuts, which is further affecting businesses and industries. 

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Earlier this month, India had extended a $500 million line of credit to Colombo for the purchase of fuel. Another $1 billion line of credit— an agreement for which is expected to be signed soon—was announced to cover essentials like food and medicines. 

(SAM)