The company raised prices by SL Rs 5 on August 1

Rasheeda Bhagat

Pricing woes


On August 1

, it raised the price of petrol from SL Rs 93 to Rs 98, and that of diesel from SL Rs 61 to 66, while the public sector Ceylon Petroleum Corporation raised the price only by Rs 3. With CPC petrol costing Rs 96, and Lanka IOC price being Rs 98, the latter's sales have fallen.

Chennai, Aug. 11

Lanka IOC's petroleum sales have dipped by almost 55 per cent since it raised petrol prices in Sri Lanka by Rs 5 on August 1, according to its Managing Director, Mr K. Ramakrishnan.

Speaking to

Business Line

in Colombo, he said after the latest agreement between the Sri Lankan Government and Lanka IOC (LIOC), the company was free to increase the cost of petroleum products, as it would no longer get subsidy from the Sri Lankan Government to hold the price line.

On August 1, it raised the price of petrol from SL Rs 93 to Rs 98, and that of diesel from SL Rs 61 to 66, while the public sector Ceylon Petroleum Corporation raised the price only by Rs 3. With CPC petrol costing Rs 96, and Lanka IOC price being Rs 98, the latter's sales have fallen. "But even at this price, compared with India, petrol here is cheaper by SL Rs 15 a litre (1 Indian rupee is SL Rs 2.3)," he said, adding that to become commercially viable the company would have to raise petrol prices by another Rs 15 a litre, in tune with rising crude prices.

The Sri Lankan Government has said that after June 30, 2006, it will no longer give any subsidy to LIOC.

Mr Ramakrishnan said that out of the 1,060 retail outlets in Sri Lanka, LIOC had 158 outlets, of which 100 were owned by it and 58 by its retailers. It has a market share of 22 per cent.

In recent months there has been a dispute between the Sri Lankan Government and the LIOC over the amount of SL Rs 740 crore due to the company - a wholly owned subsidiary of IOC - in the form of government subsidy. He said that following the settlement reached on May 30, Lanka IOC will receive SL Rs 100 crore in cash and SL Rs 400 crore in government bonds.

LIOC was originally invited by the Sri Lankan Government in 2003 to take care of the Trincomalee oil tank farm at China Bay, where there are 99 giant tanks made by the British, each with a 10,000-tonne storage capacity. It has 200 employees working at this facility, spread over 850 acres. Mr Ramakrishnan said that the combat in the Trincomalee district had not affected its operations in any way.

With an annual turnover of SL Rs 3,700 crore , LIOC is the second largest private player in Sri Lanka after Sri Lanka Telecom, and has one-third stake in Ceylon Petroleum Storage Terminals Ltd. It is at present engaged in putting up a lube oil blending plant at Trincomalee at a cost of $5 million. "We have a market share of 12 per cent in lubricants, and this operation is part of our mandate to augment Sri Lanka's petroleum resources," he said, adding that the plant would be ready in 10 months.

(This article was published in the Business Line print edition dated August 12, 2006)
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