LIOC to boost market image without subsidy comforts

by Lalin Fernandopulle

Lanka Indian Oil Corporation (LIOC), a subsidiary of the Indian Oil Corporation said it is confident of becoming the best enterprise in the country, boosting its market image once the agreement with the Government of Sri Lanka is signed.

LIOC was to clinch a subsidy deal with the government last Tuesday but was put off due to legal clauses. The oil firm hopes to sign the agreement soon which would help the company to go ahead with its programs.

The critical aspect of "Settlement Agreement" is that LIOC does not enjoy the subsidy comforts in marketing petrol and diesel since July 1, the day on which liberalisation of pricing in the petroleum industry took place. LIOC is required to sell petrol and diesel at a price based on the cost.

Chairman, Indian Oil Corporation Ltd., and LIOC, Sarthak Behuria speaking to journalists on the current status of the company said the company had to face severe financial constraints due to the delay in subsidy payments by the government.

The loss went soaring and last year alone it was Rs. 2 billion. The first quarter of this year has been a loss, second a break even scenario but the company hopes to pass down the market price benefits to the consumers in the third quarter. We hope that with favourable market conditions and with the support of the parent company we could remain afloat and continue operations, Behuria said.

LIOC is permitted to sell petrol and diesel at a price which will cover the cost. The price difference was compensated by the government in the form of a subsidy. The release of subsidy payments from the government on a monthly basis was not forthcoming and this resulted in a receivable amount of Rs. 7.560 billion.

According to negotiations the government has agreed to settle Rs. 5.16 billion as subsidy payment to LIOC where Rs. 700 million will be in the form of cash and 4.466 billion as government bonds for two years at 11 percent interest.

LIOC's diversification plan is focused on building additional infrastructure in the country. The company has commenced constructing a lube oil blending plant at Trincomalee with an investment of US$ 5 million to produce 18 million litres per year. The project is scheduled to be commissioned by 2007.

Plans to construct modern filling stations with state-of-the-art designs and facilities to provide a better and efficient service to customers are in the pipeline.

In addition LIOC will explore the possibility of marketing bunker fuels and furnace oil for inland customers. LIOC will continue to add value to the common user facility CPSTL.

Meanwhile, LIOC launched two fuel products, LankaMile diesel and LankaPremium petrol.