LIOC incurs Rs 6 loss per litre on diesel - MD

Lanka Indian Oil Company (LIOC) loses about Rs 6 per litre of diesel and the loss per month for the company from diesel is around Rs. 50 million.

However, the company earns profits from petrol, lubricants and other petroleum products and will further diversify its products portfolio to increase profits, Managing Director of LIOC, Subodh Dakwale told a press conference in Colombo last week. Dakwale said that in the first six months of 2012 the company earned over Rs.1.5 billion in profits due to prudent financial management and efficiency. Just-in-time purchasing, better inventory management and taking maximum advantage of international price declines contributes to the overall profit of the company even though it loses from diesel.

As LIOC sells a litre of diesel at Rs. 6 higher than that of the CPC (Ceylon Petroleum Corporation) at its filling stations its share in the diesel market has come down from 14 percent to eight percent after the price increase, he said.

LIOC's market share in petrol is around 18 percent and the company owns nearly 16 percent of fuel outlets in the country. Dakwale said that the shipment of diesel which had been held up at the Colombo port are not substandard diesel and it meets all major specifications. However, in the quality test it was found to be off specification in colour and appearance and not in core chemical properties.The supplier Glencore Singapore (Pte) Ltd was awarded a contract to supply 7,562 tonnes of diesel of which 4,712 metric tonnes was to be discharged in Colombo and 2,850 metric tonnes in Trincomalee.

In Trincomalee LIOC has its own testing lab and in Colombo testing is done at the Ceylon Petroleum Storage Terminals Limited, a facility used by state-run Ceylon Petroleum Corporation and LIOC.In some countries colour is not a criteria and in Sri Lanka till August last year there were no criteria for colour, officials said.

Dakwale said in other critical parameters its sulphur content was only 1,440 parts per million when the requirement was 2,550 parts per million. He said that LIOC does not sell products that are below specifications. He said that even though the company made losses in diesel this issue had not affected its diesel sales and stocks are borrowed from the CPC. Meanwhile, sources said that the state-owned CPC incurred a staggering Rs. 90 billion loss and the authorities claim different reasons; the subsidised petrol and diesel price, supply to the Ceylon Electricity Board (CEB) for thermal power generation and supply to loss-making airlines.