LIOC to boost market image without subsidy comforts
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
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