January 5, 2007 (LBO) – Sri Lanka Friday inked a 5.16 billion rupee (47.8 million dollar) agreement with Indian fuel retailer Lanka IOC Ltd. to settle a long standing subsidy payment. Lanka IOC is 75 percent-owned by Indian Oil Corp., with the remaining 25 percent listed on the Colombo Stock Exchange. The company commenced operations in February 2003 and controls around 16 percent of the local lubricant market.
A unit of Fortune 500 Indian Oil Corp., Lanka IOC will get 700 million rupees in cash and 4.46 billion rupees worth of two-year government bonds.
“We finalised the paperwork today, with the treasury secretary signing on behalf of the government,” LIOCs Managing Director, K Ramakrishnan told LBO.
Lanka IOC, which owns a third of Sri Lanka’s fuel sheds, stopped supplying gasoline and diesel to its outlets in last June when the losses climbed up to 7.6 billion rupees.
Part of the settlement deal includes aborting LIOCs agreement with Colombo due to end in 2008 and cutting profit margins –calculated as 5.0 percent on base retail prices before Value Added Tax, to 1.5 percent.
LIOCs fuel sales fell for the six months to Sept by 10.45 percent to 15.72 billion