Pratim Ranjan Bose

Kolkata , Dec 29

LANKA IOC (LIOC), which is suffering from a cash crunch, is anxiously following the ongoing discussions between the visiting Sri Lankan President, Mr Mahinda Rajapakse, and the Union Government for an early solution to the long-pending issue of payment of $70.8 million subsidy bill for retailing fuel for a period of roughly two years.

After a gap of several months, the Sri Lankan Government made a $3-million payment this month towards the subsidy bill, taking the total subsidy payment made so far to $7 million. The Lankan Government had previously paid $4 million to LIOC in two instalments.

A subsidiary of IOC, LIOC is a listed company on the Colombo Stock Exchange, controls 32 per cent retail market share, and is the only private player in Sri Lanka in the petroleum sector.

The company has already increased its exposure to market borrowings to tackle the financial crisis arising out of cap on fuel prices vis-à-vis fluctuations in international prices of crude.

While expecting the issue to figure in the discussions between Mr Rajapakse and the Union Government, a senior IOC official told Business Line: "The Sri Lankan Government has already taken a serious look at the issue. Hopefully, it will be resolved soon."

On whether non-payment of subsidy bill was affecting LIOC's expansion plans in the country, the official said that the company had already exhausted its licences for retail network valid till 2006 and would apply for further expansion in 2006-07.

LIOC currently owns a network of 170 outlets of which 100 are acquired from the State-run Ceylon Petroleum Corporation (CPC). The rest are controlled through a franchise agreement with CPC.

"We have plans for expansion of own retail outlets, and will apply for the same in the next fiscal," the official said.

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