COLOMBO: Sri Lanka has issued a one-month ultimatum to Lanka Indian Oil Company (LIOC), a subsidiary of Indian Oil Corporation (IOC), to either resume retail operations or be ready for nationalisation.

LIOC suspended its operations a month ago after the Government's arrears on the subsidy count mounted to $76 million.

The subsidy — the difference between the administered price and the operational cost price — has not been cleared since July 2004.

The company runs 162 of the 1,000-odd retail outlets in the island nation and has a 32 per cent market share in retail fuel and 16 per cent in the lubricant business.

Import stopped

Sources said that after LIOC exhausted its credit options, import of petroleum products was stopped, pending a settlement with the Government.

Colombo agreed to pay $10 million and convert the balance into Government bonds at 11 per cent interest. The agreement is yet to be formalised.

The Government also approved, in principle, a proposal to let LIOC sell products at prices determined by it.

Indications are that LIOC had placed an order for shipment of petrol from India though it is not clear when it would resume retail operations.

Customers hit: Minister

"LIOC's retail outlets are located in strategic areas in the national capital, and their bunks are empty for a month now. Consumers are the worst sufferers. We cannot be a silent spectator to the plight of people. Hence, the decision to serve a notice," Minister for Petroleum Development A.H.M. Fowzie told The Hindu .

He claimed that the issue of arrears had been amicably settled and there was no reason why LIOC could not commence operations at the earliest. He said it had been decided to take over all fuel retail outlets of LIOC after 30 days, if it did not resume selling petrol.

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