Thin Margin

January 31 (LBO) – Sri Lanka's state petroleum utility expects to just break even or make a marginal profit in 2006, after a government price supplement subsidy was withdrawn, an official said. Ceylon Petroleum Corporation's retail prices were state controlled, but the treasury gave it a price supplement until last year based on a formula that contained a 5 percent profit margin on benchmark prices.

In 2007 it made a 7.7 billion rupees.

But in June last year, the government withdrew the subsidy for both Ceypetco and its competitor, Lanka Indian Oil Corporation (LIOC).

"When the subsidy was withdrawn in June 2006, international prices were very high," says Lalith Karunaratne Head of Finance at CPC.

"In June and July we did not increase prices and we incurred sizable loss. Because of that we lost 700 million rupees in the first nine months."

Karunaratne says Ceypetco will end the year with a marginal profit or breakeven in 2006.

In 2007 it is expected to make a profit of about a billion rupees, because profit margins have also been slashed.

"We have been instructed to give the maximum reasonable price to the consumer," says Karunaratne.

"So the f