IOC has 75% holding in Lanka IOC Ltd (LIOC), the Lankan subsidiary, which is now discussing the draft agreement with Colombo.
NEW DELHI: In a move to prevent its overseas retail dream from souring, state-owned Indian Oil Corporation (IOC) has sent a fresh proposal to the Sri Lanka government. IOC chairman and managing director Sarthak Behuria told DNA Money that his company reworked the existing agreement to make it more “protected.”
IOC has 75% holding in Lanka IOC Ltd (LIOC), the Lankan subsidiary, which is now discussing the draft agreement with Colombo.
While in the domestic arena the Union government had last month devised a compensation mechanism for part-sharing of Rs 73,500-crore under-recoveries (with a crude oil base price of $70 a barrel), the Sri Lankan market was becoming a drag on the refiner’s retail business.
The spurt in international crude oil prices is making the South Asian markets unattractive for oil marketers. The Indian government allowed oil marketing companies to increase the retail price last month, besides deciding to issue bonds, though the Indian basket of crude oil moved further up on July 7 to $71.64.
Asked whether a demand for compensation from the Sri Lankan government was justified, considering the Indian government had turned down similar demand from private companies in the country, Behuria said, “The situation is different. Shell, Essar or Reliance, operating in India, never entered into any agreement with the government, while we entered into an agreement while taking over the retail outlets there.”
Behuria rejected the suggestion that the Lankan retail dream was turning sour. “It is only a temporary problem,” he added. The proposed draft is expected to give LIOC protection in future.
Sources said the Lanka government owed about $30 million in compensation to LIOC. An expert on strategic affairs pointed out that LIOC was facing a genuine problem. “Both the governments have decided to play down the issue so that it does not come in the way of relations between the two companies,” he said.
On whether diplomacy was pushing the state-owned company to carry on with the loss-making business, the expert countered that “petroleum is a long-term business” and no company would intentionally break a relationship at the slightest hint of trouble.
The Indian government was sympathetic towards the Sri Lankan government’s fiscal situation since it was dealing with both terrorism and natural calamities like tsunami, he said.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}