The Hindu Business Line : Lanka IOC's expansion plans hinge on payment of subsidy bill

Lanka IOC, the only private sector operator in the retail fuel market in Sri Lanka, controls 32 per cent of the country's retail market through 170 fuel outlets.

Kolkata , Sept. 28

LANKA IOC is expecting payment of a substantial part of its outstanding subsidy bill of $61 million, payable for a period of close to two years.

Bulk of the payment is expected to be made through tradable bonds (like the oil bonds to be issued by the Indian Government), which could be monetised by the company.

Sources in Indian Oil Corporation said payment of subsidies held the key to Lanka IOC's further investment in Sri Lanka.

"We have a number of plans for Sri Lanka. However, as on date we are going slow as non-payment of subsidies has led to higher borrowings by Lanka IOC," an IOC official told Business Line.

Lanka IOC, the only private sector operator in the retail fuel market in Sri Lanka, controls 32 per cent of the country's retail market through 170 fuel outlets.

Mr N.K. Nayyar, Chairman of Lanka IOC and the director (business development) of Indian Oil, told Business Line that the Sri Lankan Government was likely to take a decision on the issue `shortly'.

So far, the Sri Lankan Government has paid $4 million in two instalments to Lanka IOC as subsidy against the losses incurred by the company because of a cap put on product prices vis-a-vis rising crude prices.

Mr Nayyar said that the payment could be "substantial" compared to the total dues.

He, however, denied that the company was facing a cash crunch because of the outstanding subsidy bill.

"We are working on the proposed lube blending plant at Trincomalee and the EPC contract is expected to be released shortly," he said.

On the retail outlet, he said that of 170 outlets controlled by the Lanka IOC, 100 were acquired from the state-run Ceylon Petroleum Corporation (CPC). The rest were controlled through franchise agreement with CPC.

Mr Nayyar said Lanka IOC was empowered to expand its network through the franchise route.

However, because of the non-payment of subsidy, the company had decided to go slow on this.

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