Govt settles LIOC subsidy issue

Channa Kasturisinghe

COLOMBO: The Government settled the long pending subsidy issue with Lanka IOC Ltd. yesterday by paying Rs. 700 million and issuing a Government bond for the value of Rs. 4.46 billion.

The Company's Managing Director K. Ramakrishnan informed the Colombo Stock Exchange that the `Settlement Agreement' was signed with the Secretary to the Treasury yesterday. Ramakrishnan said that the Government bond is non tradable in nature and it has a maturity period of 2 years earning 11 percent interest.

Ramakrishnan said that solving of the issue would have a positive development in the company's financial performance. The Company earlier restricted issuing of fuel at its outlets claiming that it was unable to import sufficient fuel stocks due to financial difficulties.

According to the Settlement Agreement Lanka IOC is not eligible for any more subsidies on the sale of petroleum products in Sri Lanka with effect from July last year.

However, it enabled the company to fix its own selling prices of petroleum products according to international price fluctuations based on its `cost plus margin'.

Ramakrishnan also said that the positive development would have an impact on the shareholder value. Nearly 2.2 million LIOC shares traded yesterday at the Colombo Stock Market and the share price moved up by 12 percent to close at Rs. 30.50.