IndianOil set to gain from fuel price hike in Lanka
New Delhi   15-Jan-2008
Monday's hike in the administered prices of petrol and diesel in Sri Lanka is bad news for the already overburdened consumer, but good news for the cash-strapped petroleum companies, including the Indian-owned Lanka IndianOil. "The hike will help the oil sector stabilise and grow. The government's approach to pricing has been practical," K Ramakrishnan, chairman and managing director of Lanka IndianOil, said on Monday. The Lanka IndianOil, which is a wholly owned subsidiary of the IndianOil, runs more than 100 petrol pumps in the island besides having on lease the giant oil storage tanks in Trincomalee in northeast Sri Lanka. Given the glaring mismatch between the high price of oil in the international market and the low selling price of petroleum products in Sri Lanka, there was no alternative available to the Mahinda Rajapaksa government other than to raise retail prices of petrol and diesel. Lanka IndianOil had been losing SLR18 ($0.16) per litre on diesel before Monday's increase that had forced it to draw on its accumulated profit of SLRi.2 billion ($11 million) in the past two months. Ramakrishnan would like some tax concessions if a further hike in prices was not possible. But it is unlikely the government will grant this wish because hi Sri Lanka the state does not get as much by way of taxes from the oil sector as, say, India does. In Sri Lanka, the government's share of the income from oil is 26% in the case of petrol and 6% in the case of diesel.