ECONOMYNEXT - Sri Lanka's east coast is attracting bunkering volumes from the region, says listed Lanka IOC, a unit of Indian Oil Company, which saw sales volume double at its bunkering facility at Trincomalee that helped soften losses from domestic fuel sales.
The company sold 200 thousand metric tonnes of bunkering fuel in the year to end March 2018, up 144 percent from 82 thousand metric tonnes the previous year.
"The incremental volume of bunker sales in Trincomalee was not at the cost of volumes at the Colombo port or at the cost of other Sri Lankan bunker suppliers," the company said in its annual report for the year ending 31 March, 2018.
"The increase solely reflects shifting of volumes from other ports of neighbouring countries to Trincomalee," the company said.
Revenue from bunkering rose 100 percent in the year to 18 billion rupees, accounting for 20 percent of the group's 91 billion rupee revenue. The share of bunkering sales to total revenue was under 12 percent a year earlier.
"In addition to increasing our profitability, this has strengthened the country’s foreign exchange reserves as the payments are remitted in US dollars," the company said.
During the year to end March 2018, global oil prices rose 33 percent. The absence of a pricing formula for domestic motor fuel in Sri Lanka saw LIOC report a 744 million loss that year, despite revenue growing 13 percent from a year earlier to 91 billion rupees.
Lanka IOC has 17 percent share of the fuels and lubricants market, dominated by state-controlled Ceylon Petroleum Corporation.
"After a challenging year, the Board has, in-principal, decided that the company shall not bear losses on petrol and diesel in a major way," Ranjan Kumar Mohapatra, Chairman at LIOC, told shareholders.
He said Lanka IOC will continue to lobby for a pricing formula.
The company increased prices in March 2018 with the government revising prices upwards a few months later.
"We hold great faith in the potential of the national economy to surge ahead and the recent price increase by the government is a clear indication in that direction," Mohaptra said.
"It is always difficult to increase the price of petroleum products in any country and same is true in Sri Lanka where prices are controlled by the government.
"As a consequence, Sri Lanka has one of the lowest prices of auto fuels in the world. Inability to revise prices of auto fuels in sync with international prices is having an adverse effect on the fiscal health of the company," he said.
Nearly 60 percent of LIOC revenue comes from regular diesel and petrol sales, both of which declined by 2 percent and 4 percent respectively.
However, LIOC's premium brands of fuel reported 25 percent growth in sales but accounted for less than 18 percent for group revenue.
Lubricants sales grew 19 percent to 3.25 billion rupees but contributed less than 4 percent to group revenue.
Lanka IOC said it invested 522 million rupees in 2017 to expand production capacity and diversify its portfolio. (COLOMBO, 08 June, 2018)