Lanka IOC says expects ‘11-12 profit after govt fuel price hike

By Ranga Sirilal

(Reuters) - Lanka Indian Oil Corp. (LIOC), the Sri Lankan arm of India’s state petroleum firm, said yesterday it expects to turn a profit in the 2011/12 financial year, after the government raised fuel prices that contributed to a loss in the first quarter.

LIOC, part of the Indian Oil Corp., has long complained to the Sri Lankan government that it makes heavy losses on fuel sales because it cannot compete with the subsidies given to state-owned fuel dealers.

The company posted a net loss of Rs. 36.2 million for the quarter ended June 30 from a loss of Rs. 116.1 million a year earlier.

On Sunday, Sri Lanka, entirely dependent on imports, increased retail fuel prices and LIOC increased its prices in line with the state-owned Ceylon Petroleum Company. (CeyPetCo)

“We’re still losing from diesel sales but if this trend continues with the same prices we could end up in profits for the financial year 2011/12,” LIOC Managing Director K. R. Suresh Kumar told Reuters in an interview.

Kumar declined to give a forecast on second-quarter earnings, due in two weeks.

Kumar also said the company is aiming to boost lubricant exports by 54 per cent to 1 million litres by next year, from the current 680,000 litres. It sells 7 million litres locally, and aims to expand that by 12 per cent in the next year, Kumar said.

LIOC offsets its fuel losses with sales of lubricants manufactured at its plant in the eastern port of Trincomalee, bunkering operations, and bitumen sales for road building.

Kumar said he also plans to invest Rs. 200-300 million to increase bitumen storage, to maximise the potential offered by the Sri Lankan government’s $6 billion post-war infrastructure drive, which includes lots of road and bridge construction.

“The government is putting on a lot of development projects and that will continue at least for the next four to five years, so the demand for the bitumen will be there,” Kumar said.