October 10, 2006 (LBO) – Indian fuel retailer Lanka IOC is due to receive 5.16 billion rupees in cash and bonds from the government as settlement for having sold fuel below costs, officials said Tuesday. At present around 15 of the 99 tanks in the farm are operational. However as business develops, LIOC plans to develop the nearby China Bay Tankages. An agreement to this effect is due to be inked next week, LIOC Chairman Sarthak Behuria said, which will strengthen its balance sheet and give more leeway to raise working capital from banks.
Lanka IOC, which owns a third of Sri Lanka’s fuel sheds, stopped supplying gasoline and diesel to its outlets in June when the losses climbed up to 7.6 billion rupees.
However, under the settlement, Lanka IOC will receive 700 million rupees in cash and 4.46 billion rupees worth of 2-year bonds priced at 11 percent, Behuria, who is also the Chairman of Indian Oil Corporation told reporters here.
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.
“As a result, we are surrendering 2.4 billion r