Despite profits at the Sri Lanka unit of Indian Oil Corporation significantly rising in the three months to 31st December 2010, the company says it continues to lose from fuel sales and is urging the government to increase petrol and diesel prices.
Managing Director of Lanka Indian Oil Corporation (LIOC) Suresh Kumar told the Business Times that prices must be increased in line with global trends otherwise the company will incur heavy losses this year.
LIOC raised diesel prices earlier this month but was stumped by the Ceylon Petroleum Corporation (CPC) not reciprocally raising prices. Generally both companies raise prices at the same time.
As a result diesel volumes have fallen at LIOC sheds. The government is reluctant to raise prices owing to local government elections next month.
“The CPC should increase its fuel prices soon otherwise our company will further lose in volumes which are already down by 25%,” he said. LIOC is losing Rs. 27 per litre on diesel and Rs. 9.00 per litre on petrol.
The company’s net profit for the quarter to December 2010 rose marginally to Rs. 602 million from Rs. 502 million in the end-September quarter but was a phenomenal jump from Rs.12 million in the October to December 2009 quarter, a stock exchange filing said.
Earnings per share of the firm, a unit of Indian Oil Corp, were Rs 1.1 in the quarter compared with just 0.02 the year before. LIOC's sales rose 3.3 % to Rs 13.4 billion in the quarter from the same period in 2009.
Mr Suresh Kumar said the company’s profits of around Rs.210 million out of the total profit of Rs. 602 came from its lubricant, bunkering and bitumen operations.
It has also made a significant gain on exchange on its foreign exchange loan amounting to Rs 230 million due to appreciation of the rupee against the dollar.
The government’s action to remove VAT has also contributed to its profits, he said, adding however that it is better to increase fuel prices than benefit from tax concessions. “There's going to be a tremendous impact on the company's profits for the current quarter (ending March 2011) as global oil prices have skyrocketed and current prices do not reflect that increase,” he said.