Lanka IOC Plc continues to report losses for third consecutive quarter

Since January 2017, Lanka IOC has incurred a loss of Rs. 964 million mainly due to losses being suffered by the company through the sale of petrol and diesel. 

The company had reported a loss of Rs. 652 million for January-March 2017, Rs. 135 million for April-June 2017 and now has reported a loss of Rs. 177 million for the quarter July-September 2017. 

The market prices of auto fuels were last revised in January 2015 and since then prices have not been revised in the country. The price of crude oil, which touched a bottom of $ 30/bbl, has now risen to almost $ 62/bbl, but the retail selling prices has remained the same. 

Further, during this period, taxes have been further increased but selling prices have not been increased. Above all, oil companies have to bear the burden of exchange loss too due to the depreciation of the Sri Lankan rupee by almost 18%. 

The recent surge in the international prices of petroleum products has added to the losses being made by the company. Although the company has performed well in other business segments, since 80% of its turnover is derived from auto fuels, the loss/gain on petrol and diesel finally decides the profitability of the company. 

LIOC has repeatedly requested the concerned authorities to either increase the selling prices of auto fuels or reduce the taxes. In petrol, out of a selling price of Rs. 117 per litre, Rs. 57 per litre goes towards taxes apart from other levies. Similarly, in diesel, out of a selling price of Rs. 95 per litre, Rs. 30 per litre goes towards taxes apart from other levies. 

LIOC commands a market share of around 16% in auto fuels and the balance is with the Government-controlled entity. As per the sources, based on the prevailing international prices of petroleum products, oil companies in Sri Lanka are losing around Rs. 24 per litre on petrol and Rs. 16 per litre on diesel. 

In view of the significant losses being incurred by oil companies and its impact on the Sri Lankan economy, the Sri Lankan Government is contemplating implementation of a pricing formula in the country.