Financial Times

Lanka IOC cash strapped as govt. delays $57m fuel subsidy
Lanka IOC is “cash strapped” because of delays in getting the fuel subsidy in violation of the deal between the Indian company and Sri Lankan government, a senior Indian diplomat said, warning that such practices are not good for investments. “Lately, we have been concerned by the delay in subsidy payment to Lanka IOC,” said Sunjay Sudhir, First Secretary (Economic and Commerce) of the Indian High Commission. LIOC, with an investment of $75 million and further investment in upgrading the existing infrastructure at their outlets, is perhaps the largest Indian investment in Sri Lanka, he told a seminar at the Ceylon Chamber of Commerce. “LIOC has set new standards in its area of operation,” Sudhir said. “Today, the company is cash strapped due to nonpayment of subsidy amounting to $ 57 million.” He said this was in “clear violation” of the pricing formula agreed between the government of Sri Lanka and LIOC.

“The goal posts cannot be changed in the middle of the game,” Sudhir said. “Such examples do not bode well for prospective investments.”Sudhir was speaking on the Indian perspective on the proposed Comprehensive Economic Partnership Agreement (CEPA) between India and Sri Lanka that is to be concluded by year’s end.

He said India shares Sri Lanka’s perspective that predictability and the safeguards agreed to between the government authorities and the investors is essential for investments. He said that there is a growing feeling in India that while foreign direct investment is very desirable, the socio-economic costs to both countries must be carefully considered.

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