Sri Lanka hikes excise duty on diesel to Rs13 a litre

ECONOMYNEXT – Sri Lanka’s finance ministry has raised excise duty on diesel by Rs10 a litre to Rs13, a move that will erode profit margins of the listed Lanka Indian Oil Corp and state-run Ceylon Petroleum Corporation (CPC).

CPC chairman T. G. Jayasinghe said the corporation will now lose money on diesel sales as well and that an increase in retail prices is yet to be decided.

The share price of LIOC fell almost 10% to Rs37.80 on the Colombo stock exchange Friday.

Bartleet Religare Securities said in a research note they believe LIOC will have to absorb the increased tax amount as a cost since there was no indication of a retail price hike, which they calculate will impact margins.

“Our calculations indicate around a 400 basis points drop in gross profit margin and Rs750 million bottom line hit per quarter,” they said.

Jayasinghe said the excise duty on diesel was raised three days ago.

“Diesel was the only item on which we had a profit,” he said. “Now the loss on diesel is Rs5.06 a litre. On petrol sales we are losing Rs21.12 a litre.”
(COLOMBO, August 26, 2016)

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