Buoyed by impressive performance, Lanka IOC remains unperturbed by end of tax holiday

The 10-year tax holiday enjoyed by Lanka IOC (LIOC), an overseas venture of Indian Oil Corp., comes to an end in mid-February this year. However, the company is still buoyed by last quarter’s statistics and representatives said they are prepared to pay the 15% tax.
In FY 2010-11, LIOC made modest profits of LKR 877 million (US$6.8 million), and LKR 906 million (US$7 million) in FY 2011-12 following a couple of bad years. The first two quarters of 2012-13 on the other hand, have been impressive and the company expects to keep the momentum going.
The public-liability listed company retails petrol and diesel fuel in Sri Lanka, and is also involved in bunkering, lubricants, and bitumen. This year, LIOC plans to venture into the petrochemicals market.
Sri Lanka consumes about 4.5 million tons of petrol and diesel annually and the volume is expected to grow to about 6 million tons by 2020.
“We are geared for that (end of tax holiday). We will have to provision about LKR 100-150 million (US$784,930-US$1.1 million) this financial year for tax. We are not seeking an extension of the tax holiday,” said Subodh Dakwale, LIOC managing director. “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 Corp., the other, but major player in the Sri Lankan market). We will continue pushing for this,” he added.
To remain competitive in the market, passing on the tax to customers is not an option for LIOC because its pricing has to be closer to that of Ceylon Petroleum Corp. (January 17, 2013)