Financial Times - LIOC says without subsidy no reason to continue

As the tussle between the Lanka Indian Oil Company (LIOC), and the government continued over the non-payment of a Rs 7 billion subsidy due to the company, LIOC said it was no use continuing without a subsidy.

K. Ramakrishnan, Managing Director LIOC told The Sunday Times FT that the company's current stock of petrol will last for less than 12 days and diesel will hold on for 42 days.

“Due to the government price controlled product that we are selling, the subsidy is extremely important. There is no point in continuing without a subsidy,” he said. Industry analysts said LIOC has told the government that they will have to quit Sri Lanka if they are unable to find a speedy solution.

Asked whether LIOC will quit, Mr Ramakrishnan said, “Hopefully the government will not drive us to it.” In a letter to the Colombo Stock Exchange he has confirmed that LIOC will not leave the country, but industry sources said that the company is ‘fed up’.

Mr. Ramakrishnan said that up to last month, the subsidy due from the government was Rs 7 billion and it was a large amount without which the company cannot run. “There is too much money locked up and it is a big amount to be shut in for a small company like ours,” he said, adding that this has choked the operations of the company.

“We have been borrowing from the banks and supporting a continuous supply of petrol and diesel in the country. We have no further intention of borrowing from the banks beyond our capacity to service the loans, which might endanger our financial credibility,” he said. He said that the matter was discussed with the Treasury at length, but their constant reply is ‘we’ll get back to you’. “I have walked the distance from my office at the World Trade Centre to the Treasury many a time, but a satisfactory response is yet to be got,” he said.

“Our petrol stations may go dry of petrol and diesel, if the government does not settle our dues on an immediate basis. This has been communicated to all appropriate levels in the government and we may end up with the business coming to a halt due to a drying up of petroleum,” Mr. Ramakrishnan said.