Margin Call

July 11, 2009 (LBO) – Lanka IOC, the Sri Lankan unit of Indian Oil Corp., has urged the government to change import duties and blamed its 1.2 billion rupee loss in the year to March 2009 partly on an import duty hike. LIOC’s turnover last year rose 7.8 percent to 47.617 billion rupees, although it made a loss of 1.2 billion compared with a profit of 2.3 billion the previous year.

Managing Director K R Suresh Kumar said domestic selling prices, which are fixed by government, could not be adjusted to suit changing international prices.

“The selling price and the duty structure have been revised several times resulting in instability in the market and the margins moving from positive to negative,” Kumar said. LIOC chairman S V Narasimhan said an increase in import duty on petrol imposed on the firm and higher value added tax eroded profit margins.

“The total impact of duties on petrol consequent to the revision is nearly 65 percent,” he said.

“There is an urgent need to review the duty structure and impose a rationalized duty structure with fixed and variable components to accommodate rise and fall in the import prices,” Narasimhan said.

Stability in prices would be possible if the government ta