Horrible Dream

November 29, 2006 (LBO) – Indian fuel retailer Lanka IOC Ltd sank deeper into the red posting a 605 million net loss during the quarter ending Sept., as it is yet to collect billions of rupees from the Sri Lankan government for selling fuel below costs. A unit of the Fortune 500 Indian Oil Corp. LIOCs fuel sales fell 28 percent to 6.78 billion rupees from July-Sept over the same period 2005. The firm made a 605.12 million net loss during the second quarter of 2006, over a profit of 175.09 million rupees in 2005.

For the six months to Sept, sales dipped 10.45 percent to 15.72 billion rupees, with losses piling up to 1.189 billion rupees, LIOC said Wednesday.

During the second quarter LIOC had written off 187.16 million rupees for subsidy payments.

Lanka IOC, which owns a third of Sri Lanka's fuel sheds, stopped supplying gasoline and diesel to its outlets in June when the losses climbed up to 7.6 billion rupees.

Both sides struck a compromise, where LIOC was allowed to fix prices across its fuel sheds in August, while Colombo agreed to payback 5.16 billion rupees.

However, both sides are yet to ink the settlement agreement, where LIOC gets 700 million rupees in cash and 4.46 billion rupees worth of 2-year bonds priced at 11 per