LIOC requests US$ 4m for subsidy
 

by Hiran H.Senewiratne

Lanka IOC has requested the Government to increase the petroleum subsidy by US$4 million for a month at today's price to be in business due to escalating oil prices. If oil prices remain at US $ 70 per barrel and the Sri Lankan Government continues to subsidise till end of December, then the Government will owe IOC US $ 85 million.

If oil prices reach US$100 per barrel, the subsidy will go up to US$ 140 million, Lanka IOC Managing Director M. Nageswaran told the Daily News.

At present, the Government owes US $51 million as subsidy for the IOC Company and therefore they have put on hold their expansion programmes until they get the funds, he said.

According to company sources they have stopped all their expansion plans like venturing into bunkering and gas and now concentrate on keeping the basic trading activity alive because they are short of funds.

Nageswaran said that if the Government could increase the petroleum subsidy upto US$ 70 million it could also help the company to survive with the escalating oil prices in the market.

However, Treasury sources said the Government has agreed to settle 30 per cent to 40 per cent of the subsidy payments before the Presidential polls. Company sources said that they are considering a proposal which offers to settle dues through petroleum assets (like sheds or land), Government bonds and cash.

It is also borrowing money from Standard Chartered Bank, Bank of Ceylon, Citibank and Deutsche Bank to fund day-to-day expenses, the source said.

However, the Government owes US$ 92 million in subsidy payments to state-run Ceylon Petroleum Corporation (CPC).

But Sri Lanka's oil bill is threatening to shoot past US$ 1.4 billion as at year end, and the government is resisting a fuel hike as it has a direct baring on the cost of living in the country. Lanka IOC and CPC are the main fuel suppliers in the country.

Lanka IOC has taken a 32 per cent share of the retail fuel market and 16 per cent of the lubricant market since it began operations in February 2003 after the Government gave the company 100 Ceypetco filling stations.