REUTERS: Sri Lankan fuel retailer Lanka IOC put up prices for its premium brands yesterday, three months after the government increased the duty on oil products, and said it will have to raise other petrol prices if the government fails to hike official prices.
The move by Lanka IOC Plc, one of two fuel retailers along with state-owned Ceylon Petroleum Corp (CPC), will put pressure on the government to raise pump prices, which are normally set in talks between the government and retailers.
Under pressure from the International Monetary Fund to boost revenue, Sri Lanka’s finance ministry increased the excise duty on diesel by Rs.10 to Rs.13 per litre from Aug. 20, stipulating that fuel retailers could not pass on the cost to consumers.
Lanka IOC Plc, a subsidiary of Indian Oil Corp, said in September that the government’s decision was likely to hit its 2016/17 second-half earnings.
“We increased only the prices of premium brands,” Lanka IOC’s managing director Shyam Bohra told Reuters on Thursday on the phone from India.
“The government didn’t increase the retail prices but increased the taxes. We cannot sustain as we are making losses and there should be a pricing formula.”
Lanka IOC increased the prices of premium brands of Xtra premium Euro 3 by Rs.2 to Rs.123 a litre and Xtra mile by Rs.2 to Rs.99 a litre, but kept the prices of other products in line with Ceylon Petroleum Corp (CPC).
Bohra said his company was incurring a loss of Rs.17 per litre of petrol and two rupees per litre of diesel as of Wednesday, and would be forced to raise prices if the government did not act itself.
Lanka IOC had previously been cushioned against losses in petrol since December 2014 by the profit margin offered by diesel sales, he said.
Petroleum Minister Chandima Weerakkody said in August that CPC would also incur a loss of about 2 billion rupees a month after the increase in
Shares in Lanka IOC were trading up 0.5 percent at 34.50 rupees at 0533 GMT on Thursday in early trade.