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After its series of appeals and requests to the Sri Lankan Government went unheeded, Lanka IOC (LIOC), an overseas venture of the IndianOil Corporation, unilaterally raised diesel prices over the past weekend by LKR 5 per litre. The only other retailer, Ceylon Petroleum Corporation, has not revised prices so far.
“We had no other way out. Our loss would be very high and LIOC's financial position would be adversely affected. International prices have further gone up now and further imports would be even costlier,” Lanka IOC Managing Director, Mr K.R. Suresh Kumar, said in an interview.
“In the budget for 2011, the (Sri Lankan) Government introduced a customs duty of LKR 15 per litre on petrol and LKR 4 per litre on diesel. We asked the Government to waive the duty given the high cost of imports or revise selling prices. The Government subsequently waived the duty on diesel. But the problem for the Lanka IOC was that the duty was waived on petrol with effect from January 11. We had received a consignment on January 8, thus making us ineligible for the duty waiver. This would cost Lanka IOC approximately LKR 220 million ($2 million),” he added.
Lanka IOC imports petrol and diesel for selling them through its 153 retail outlets. The selling prices in Sri Lanka are Lanka LKR 115 per litre for petrol and LKR 73 per litre for diesel. Lanka IOC revised the diesel price to LKR 78 and kept petrol at LKR 115.
Because of the hike in diesel prices, the queues are longer at Ceylon Petroleum Corporation retail outlets. It's a situation that CPC cannot sustain for long, one industry hand said.
Meanwhile, Lanka IOC has requested the Government to make the duty waiver applicable for the consignment imported two days prior to the notification.
“We have also requested for price revision given the high import prices are waiting for a response. Under the circumstances there was very little choice for Lanka IOC. Increasing price of diesel was inevitable. However, the increase is nominal considering the actual loss suffered,” he said.
According to the agreement between the Lanka IOC and the Sri Lankan Government in 2003, there is no restriction on the company for increasing prices.
The Sri Lankan Government resorts to duty concessions to make good the losses suffered by the two oil majors; but has not spelt out a pricing policy.
Retail rates for petrol and diesel in Sri Lanka are much lower than in India. There were as many as 12 hikes in India during the past year, while in Sri Lanka, there has been no increase in retail oil prices.
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