R. K. Radhakrishnan
Colombo, Jan.16:
Next month, the 10-year tax holiday enjoyed by
Lanka IOC (LIOC), an overseas venture of Indian Oil Corporation, comes to an
end. Buoyed by the last quarter’s statistics, LIOC says it is unperturbed by
the fact that it will have to pay 15 per cent tax from mid-February.
LIOC made modest profits in FY 2010-11 (LKR 877
million) and FY 2011-12 (LKR 906 million), after a few bad years. In 2012-13
too, the first two quarters have been impressive, and LIOC expects to keep the
momentum going.
Geared for tax
LIOC, a public-liability listed company, retails
petrol and diesel in Sri Lanka, and is into the business of bunkering,
lubricants, and bitumen. It also plans to venture into the petrochemicals
market this year.
Annually, Sri Lanka consumes about 4.5 million tonnes
of petrol and diesel. This is expected to grow to about 6 mt by 2020.
“We are geared for that (end of tax holiday). We
will have to provision about LKR 100-150 million this financial year for tax.
We are not seeking an extension of the tax holiday,” LIOC Managing Director
Subodh Dakwale said, in an interview.
“We have been requesting the Government of Sri
Lanka to firm up a pricing policy. There is need for formula-based pricing for
providing a level playing field with CPC (Ceylon Petroleum Corporation, the
other, but major player in the Sri Lankan market).We will continue pushing for
this,” he added.
LIOC imports petroleum products and retails it
in Sri Lanka. Since LIOC can fix price of its products, it sells diesel about
LKR 6 more than the Sri Lanka-owned CPC. LIOC has, hence, lost part of its
diesel clientele, but has managed to retain its petrol customers (20-21 per
cent of market share) because both CPC and LIOC retail petrol at the same
price.
Staying competitive
Passing on the tax to customers is not an option
for LIOC as its pricing has to be closer to that of CPC to be competitive in
the market.
In a decade of operations, LIOC’s turnover has
grown from LKR 14.5 billion to LKR 60.4 billion (2011-12). It plans to add a
few automated petrol sheds this year, and refurbish part of the World War 2
vintage Trincomallee tank farm.
“We want to use part of the tank farm to set up
a bitumen handling facility. We have big plans for the tank farm. In the first
phase we will put to use about 30-35 of the tanks,” Mr Dakwale said.
