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Lanka IOC prepared to set own fuel prices to minimise losses

Reuters  |  COLOMBO 

(Reuters) - Sri Lankan will be forced to implement its own pricing mechanism to minimise losses if the government fails to implement its proposed fuel price formula, the company said on Friday.

The move by Lanka IOC, a subsidiary of India's IOC, comes after the government failed to increase fuel prices charged by state-owned (CPC) in line with rising global

On March 24 raised its prices because of losses incurred after the government's failure to implement a pricing formula for CPC.

last week said that the cabinet has approved a price formula with revisions every two months. The government raised fuel prices last week after raised its prices.

"Cabinet approval is there, but the pricing of petroleum is a very touchy issue across the globe and the same is the case in Sri Lanka," Lanka IOC's told

"If the proper pricing mechanism is in place, we will follow it. If it is not, then we will have to sell our products at the cost plus what ever actuals are there."

Lanka IOC posted a loss of 755.6 million rupees ($4.79 million) in the year to March 31, against a 3.07 billion rupee profit in the previous year, mainly because of in conjunction with for fuel.

"Most likely it will be that we will have to have our own prices ... We can't keep on losing money," Bohra added.

Maitripala Sirisena's coalition government, which has pressed ahead with unpopular fiscal reforms since coming to power in 2015, has been hesitant to implement the fuel price formula before local elections.

The coalition partners suffered a humiliating loss in local government polls in February.

Bohra said the government has yet to inform the company about the new pricing formula and said it should also be transparent for the public.

The government had agreed in principle with an (IMF) requirement to implement the pricing formula in return for a $1.5 billion three-year loan approved in 2016.

The IMF on Thursday said that if the pricing formula is implemented properly, it "would eliminate fuel subsidies that benefit the rich rather than the poor".

"We think that an automatic fuel pricing mechanism marks a major step toward completing the that are under way in Sri Lanka, and minimises the fiscal risks," said of the

($1 = 157.6500 Sri Lankan rupees)

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by David Goodman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, May 18 2018. 17:47 IST