Fuel Mix

May 22, 2008 (LBO) – Indian Oil Corporation’s Sri Lanka unit raised diesel retail prices by 20 rupees to 100 rupees a litre putting pressure on the state-run Ceylon Petroleum Corporation (CPC) which sells more fuel to follow suit. Before the increase, Lanka IOC says it was losing 43 rupees a litre from the sale of diesel and 3 rupees a litre from diesel.

“We raised diesel prices because we cannot absorb the losses anymore,” Lanka IOC managing director K Ramakrishnan told LBO.

The firm usually follows the pricing of CPC which sells more than 130 million litres of diesel a month compared to Lanka IOC’s 30 million litres, as a unilateral price increase loses it market share.

But CPC has delayed prices increases despite claiming to lose more than 7 billion rupees so far this year.

Lanka IOC’s diesel price would push all its customers to CPC increasing the losses of the retailer.

Lanka IOC had earlier prodded the CPC into action by halting diesel sales.

Sri Lanka’s retail fuel prices are politically-driven based on a belief that inflation in the country is a petroleum rather than monetary phenomenon.

In the past, heavy fuel subsidies and the sudden increased of bank credit used to finance such c