IOC Lanka arm losing market on higher selling price
New Delhi   01-Sep-2011

Lanka IOC, the Sri Lankan subsidiary of state-run IndianOil (IOC), faces the same fate as private sector oil marketers Essar Oil and RIL so far as diesel sale is concerned. Lanka IOC, which competes with Sri Lankan government-owned Ceylon Petroleum Corporation (Ceypetco), has lost 80 per cent of its diesel sale owing to higher selling price.

Between April and August, the Colombo Stock Exchange-listed company’s share in the Sri Lankan diesel market was down from 25 per cent to 5 per cent. “The price of diesel at Lanka IOC outlets is SLRs 85 a litre, higher by SLRs 9 to the outlets of Ceypetco. We have, therefore, lost our sales volumes to Ceypetco. However, at the current price, too, we are incurring a loss of 20 Sri Lankan Rupee a litre,” Suresh Kumar, managing director, Lanka IOC told Business Standard.

The situation reminds of the Indian private oil marketers like Essar Oil and Reliance which compete with the government-owned IndianOil, Bharat Petroleum and Hindustan Petroleum. The private companies in India are almost out of the diesel market though they have some presence in petrol after it was decontrolled in June last year.

Lanka IOC, which started operating in 2002-03, does not have a refinery and imports petrol and diesel for sale at its 158 outlets. Its annual fuel sales from these outlets is around 550,000 tonnes.

The Sri Lankan government, which had freed controls on private oil companies, at times asks the government-owned Ceypetco to cap petrol and diesel prices to contain inflation. “The government here does not revise prices in tune with international price changes and we have to suffer,” he said.

Diesel has impacted the Colombo Stock Exchange-listed company’s performance in the quarter ended June. On sales of SLRs 13 billion, the company incurred a net loss of around SLRs 36 million.

The company’s saving grace is petrol, where it is able to compete with Ceypetco at a price of SLRs 125 and is still holding a market share of 25 per cent.

While fuel retail usually accounted for around 80 per cent of the company’s revenues, it has now come down to 60-65 per cent. Kumar, however, said the revenues had been intact, as the company had managed to increase sales in its other businesses such as sale of lubricants and bitumen and bunkering.