IOC assessing dipping sales at Lanka arm

State-run Indian Oil Corporation (IOC) is assessing the situation of dipping sales at its Lanka subsidiary and will take a decision soon, which may include further raising retail prices.

"We are assessing the situation. However, it will take some time to arrive on a decision as there are a lot of issues involved there," IOC sources said.

Lanka IOC's fuel retail outlets have seen their petrol sales dip by almost 55 per cent after it raised its petrol prices by Rs 5 on August 1. In comparison, public sector Ceylon Petroleum Corp (CPC) had raised its petrol prices by only SL Rs 3 per litre.

Post hike, Lanka IOC's petrol cost SL Rs 98 per litre compared with CPCs' SL Rs 96 a litre. Narasimhan said that even after the price hike, there was a need to further increase the prices by Rs 15 a litre in order to make the company commercially viable.

"Prices need to be raised in tune with the international crude oil prices," he said. International crude prices have been hovering around the $75 per barrel mark.

The Sri Lankan Government has said it will not give any subsidies to Lanka IOC after June 30, for selling petrol and diesel below the cost of production. However, it has allowed the company to raise the prices of petroleum products.

In recent months, there had been a dispute between the Lanka IOC and the Sri Lankan Government over an amount of SL Rs 740 crore, which the government owed to the company in the form of subsidies.

Lanka IOC's fuel pumps ran dry for nearly 2-months, following the dispute. However, a settlement has been reached between the two parties and the company is resuming gasoline sales.

The government has agreed to pay Lanka IOC SL Rs 100 crore in cash and SL Rs 400 crore in the form of govt bonds.