Nut Cracker

Oct 31, 2008 (LBO) – Profits of Lanka IOC, a unit of India's IOC fell 83 percent in the September quarter to 109 million rupees amidst high taxes and hedging costs, while six months profits were flat at 1.1 billion rupees, an official said. Lanka IOC managing director R Ramakrishnan said his firm was losing money also on petrol with a 26,000 tonne stock imported at 144 dollars a barrel. At one time the loss was 8 rupees a litre, he said.

In Sri Lanka petrol is retailed at 157 rupees a litre. According to Central Bank data, refined petrol in Singapore was 43.25 rupees a litre (with US dollar at 111 rupees), diesel 50.6 and Kerosene 53.14 rupees, yesterday.

Lanka IOC has hedged about 30 percent of its volumes. The contracts are due to run out in July 2008.

State Taxes

In September a 15 rupee tax was imposed on petrol. The company was also hit by taxes amounting to 39.50 rupees a litre on petrol and 10 rupees on diesel.

Sri Lanka's government has imposed discriminatory import duties on imported refined products hurting Lanka IOC more than the state run Ceylon Petroleum Corporation, which refines a part of its products at home.

A fuel retailer should not have an imperative to hedge its products if a price f