The Sri Lankan Prime Minister’s Office has requested Lanka IOC PLC to consider fulfilling the foreign exchange requirements for its petroleum imports through its Indian parent company, a government official told Finance Today.
As a wholly-owned subsidiary of Indian Oil Corporation Limited, Lanka IOC PLC has relied entirely on Sri Lanka’s foreign exchange earnings to fund itself for oil imports since its incorporation in 2003.
At a time when Sri Lanka is facing a foreign exchange crisis, Lanka IOC has the potential to meet the foreign exchange requirements for petroleum product imports through its Indian parent company, a government spokesman said.
The spokesman also pointed out that when Sri Lanka signed agreements with Lanka IOC to commence operations in Sri Lanka, not including a saving regulation regarding their foreign exchange requirements was a mistake. Such a mechanism could have been included as a safeguard in the event of a dollar crisis which has materialised today.
Lanka IOC for their part said it is difficult to use their parent company’s foreign reserves, as the two corporate entities are companies located in two separate countries, with separate independent corporate identities.
Nevertheless, some experts say a temporary adjustment mechanism is not impossible in the context of the wholesome assistance provided by India. All fuel received by Sri Lanka under the Indian credit line is, however, imported to the country via the Indian Oil Corporation and utilised Indian reserves or dollar flows.
Lanka IOC has an islandwide footprint of 210 retail outlets covering nearly 12% of the country’s retail fuel demand. Lanka IOC has earned US$ 60.64 million last year as export revenue by providing bunkering facilities, Bitumen, and Lubricants outside Sri Lanka.
By Ishara Gamage