Sri Lanka retailer cuts diesel price further

Indian Oil Corp's (IOC.BO: Quote, Profile, Research) Sri Lankan retailing unit has reduced its diesel prices for a second time in a week by 10 more rupees ($0.09) per litre to 110 rupees line with those of state-owned Ceylon Petroleum Corp (CPC), official said on Thursday.

Lanka IOC LIOC.CM reduced its diesel prices to match the state owned oil retailers diesel prices in line with a request by the Sri Lankan government, said K.Ramakrishnan, the managing director of the Lanka IOC.

"We have done this on the advice of the government, we also firmly believe that the government will be lenient in the new petrol tax in turn of reducing the diesel prices," Ramakrishnan said.

Lanka IOC on Tuesday announced its decision to reduce its diesel prices by 10 rupees to 120 rupees with effect from Tuesday midnight. This followed the government's request last week that it cut by 20 rupees to bring them into line with those of state-owned Ceylon Petroleum Corp (CPC) or face 'severe' action.

Until Tuesday Lanka IOC sold diesel at 130 rupees ($1.2) a litre, 20 rupees more than CPC. The government said that had pushed up losses at CPC by 400 million rupees a month as drivers have flocked to its cheaper pumps, increasing its sales by 20 million litres.

Lanka IOC raised its diesel price three times late last month, increasing its margin over CPC, but kept petrol prices at the same level as CPC at 157 rupees a litre.

Sri Lanka says it already subsidises CPC at 30 rupees a litre for diesel.

In mid-2006, Sri Lanka allowed Lanka IOC to fix its own prices depending on world markets.

The Lanka IOC officials last week said 'there is no level playing ground' in Sri Lanka as the government imposed a new 24.50 rupee per litre tax on petrol imported as a finished product since May 25, had cut into its margins.

Lanka IOC has to pay the tax on every litre of petrol, while CPC only pays it on half the petrol it sells as the other 50 percent is refined locally, Lanka IOC said last week. ($1=107.73 Sri Lankan rupees)