Cutting administration costs and overheads through modern management practices and right pricing of petrol and diesel have bolstered the profits of Lanka IOC, a subsidiary of Indian Oil corporation, in the financial year 2010-2011, a top official of the company said.
Lanka IOC Managing Director K. R. Suresh Kumar told the Business Times that the company has made a profit of Rs. 876 million in the financial year 2010-2011 compared to a loss of Rs. 422 million in the previous year. The revenue of the company also increased from Rs. 50.21 billion to Rs.51.74 billion in 2010-2011. The Lanka IOC has made around 40 % of its profits from lubricants, bitumen and bunkering business other than the sale of petrol and diesel, he revealed.
Mr Suresh Kumar noted that Lanka IOC has managed to stay in petroleum business in Sri Lanka while importing its entire refined petroleum product requirement from the inception of the company mainly due to its modern administration practices, cost cutting methods and overseas borrowings at low interest rates. He noted that his company has been able to compete with Ceylon Petroleum Corporation (CPC) which has the advantage of bringing down crude oil and refine at its Sapugaskanda refinery at a low cost, because of its ability to manage the company at reduced administrative costs and other overheads.
On the other hand it has improved margins by catering to niche premium segment with premium petrol and diesel at a higher price than regular petrol and diesel. The premium petrol is priced Rs.5 more than regular petrol.
He disclosed that he has suggested implementing a pricing formula, based on the world oil price fluctuations, favourable for both entities, the CPC and the LIOC but it was so far unheeded by the authorities. However he added that Lanka IOC has managed to bring down its losses from Rs.400 million in the first quarter last year to Rs. 111 million in the March 2011 quarter by increasing the price of diesel from Rs. 73 to Rs.78 in February 2011, he said.
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