Financial Times

LIOC claim under negotiation, minister says
While the government accepts liability over the payment of a fuel subsidy owed to Lanka IOC, the actual amount would be negotiated between the two parties, Finance Minister Sarath Amunugama said.

Asked about Lanka IOC’s claim for $57 million as a fuel subsidy, the Finance Minister said the claim is being negotiated. Last week The Sunday Times FT reported that the Attorney General had disputed the Indian Oil Corp subsidiary’s claim. The two sides are holding talks over the claim to arrive at a mutually acceptable settlement.

The Public Enterprises Reform Commission (PERC) had written to LIOC saying that the government is not liable to pay LIOC the fuel subsidy unless it makes actual losses by not applying the pricing formula in the privatisation agreement.

Attorney General K.C. Kamalasabaysan had advised PERC that the government is not liable to pay LIOC a subsidy unless it incurs an actual loss on fuel sales, and not a loss of profits.

It also follows an independent opinion on the validity of LIOC’s claim for a subsidy, sought by the government from President’s Counsel K. Kanag-Isvaran and Attorney-at-Law Dr Harsha Cabral which provides a similar view.

LIOC officials and Indian High Commission officials maintain they are sticking by the subsidy claim. LIOC Deputy Managing Director S. Srinivasan in a July 20 letter to PERC chairman Nihal Sri Ameresekera said, “as agreed at the meeting at the Attorney General’s Department on July 5, we will give due consideration to the same and will revert to the AG and yourself, giving our views based on advice …”

Amunugama said after the negotiated claim is paid the subsidy will end, trading off with the end of VAT on some fuel products. “The VAT payment is and could be much higher for LIOC than what they receive from the subsidy,” he said.

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