Lanka IOC raises retail prices to cut losses

By Ranga Sirilal

COLOMBO (Reuters) - Sri Lankan fuel retailer Lanka IOC Plc has raised retail prices for gasoline and diesel, the company said on Saturday, due to losses incurred after the government's failure to implement a pricing formula.

The move by Lanka IOC, one of two fuel retailers along with state-owned Ceylon Petroleum Corp (CPC), will put pressure on the government to raise prices at pumps, which are normally set in talks between the government and retailers.

Lanka IOC, a subsidiary of Indian Oil Corp, said it had incurred losses during the last four consecutive quarters and the cumulative loss was 1.3 billion Sri Lankan rupees ($8.35 million).

"Despite prices of petroleum products going up significantly, selling price of petrol and diesel has not been revised which has resulted in heavy losses to oil companies," Lanka IOC's managing director Shyam Bohra told Reuters.

"Increase in taxes and depreciation of the Sri Lankan rupee has also significantly affected the margins of oil companies."

Under pressure from the International Monetary Fund (IMF) to boost revenue, the government increased the excise duty on diesel by 10 rupees to 13 rupees per litre from Aug. 20, but asked fuel retailers not to pass on the cost to consumers.

Lanka IOC, which has around a one-third market share in the country, increased the price of gasoline by 9 rupees to 126 rupees a litre and diesel by 5 rupees to 100 rupees.

"By this increase itself our volume will come down. We will lose volume and market share with this increase," he said.

State-owned fuel retailer CPC said it had not taken a decision on whether to increase prices.

Bohra said his company was incurring a loss of 12 rupees per litre of petrol and 17 rupees per litre of diesel as of Friday, and the decision to raise the price was taken after the government did not act itself.

($1 = 156.1000 Sri Lankan rupees)

(Editing by Shihar Aneez and Mark Potter)