LIOC faces stiff Govt.

 By Sunimalee Dias

Sri Lanka based Indian oil company (Lanka IOC) is facing a dilemma due to a surge in its borrowings and losses topping at Rs.116 million in the first quarter alone expected to continue. This comes in the wake of the government's stiff attitude towards LIOC's repeated calls for a revision in the price levels.

LIOC has been calling on the government to revise the prices since the beginning of this year that has resulted in the first quarter's losses accumulated at Rs.116 million.

The company's Managing Director Suresh Kumar said yesterday, "I'm surprised they (government) have not done anything on that so far."

He added that the company expects the losses to continue at the same level should the prices not be increased.

"A similar trend is expected in this quarter as well and it is difficult for us to take in as the borrowings are increasing," he said.

It was pointed out that as of April 1, LIOC's borrowings were less than US$50 million whereas at the end of July it is expected to be around US$90 million.

Surge in borrowings is likely to continue, which the company is currently unable to hold, Kumar observed.

He noted they continue persist on the government to take corrective action in a bid to ensure the situation could be curtailed.

Currently LIOC is making a loss of Rs.13 and about Rs.8 per litre in diesel and petrol respectively.

Moreover, a further Value Added Tax (VAT) credit accumulated is also being taken up with the government that has now topped over Rs.900 million.

With an 85% adjustment allowed in terms of value addition the company has to continue to pay 15% of output VAT that is the mandatory minimum.

Kumar pointed out that the government has been sought out every 15-20 days to assist the company in this regard and settle the accumulated credit.

However, this too has not been forthcoming and foreign company is facing crucial circumstances for a business that is continuing to diversify and invest further in the lucrative Sri Lankan market.

In the bunkering business the company has been doing "not too good," Kumar observed noting the reasons to be due to unfavourable conditions on the sea front.

He said however, that though volumes had come down, in monetary terms the company was making relative gains in this area of business.

Speaking of the company's newly ventured lubricants business, Kumar noted they had made a growth of more than 20% in the first quarter this year compared to the same period in 2009. LIOC is also looking at obtaining approval from the government for running 10 stations by the end of this year. These are expected to be carefully situated around the country with eyes also set on the North and East.


source - www.dailymirror.lk