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Indian-owned Essar Oil UK Limited (EOUK) has reached a new 'time to pay' (TTP) agreement with Her Majesty's Revenue and Customs (HMRC) on Tuesday, which gives the firm more time to settle its Value Added Tax (VAT) arrears and thereby provides it breathing space to emerge out of its financial crunch.

Chief Financial Officer of EOUK, Satish Vasooja, stated: "With this time to pay arrangement, we now have a significant runway to stabilise our balance sheet which has been adversely impacted by the (Covid-19) pandemic."

EOUK made a TTP commitment to HMRC in April 2021 to pay its 770 million pound arrears by January 2022.

"EOUK has already repaid HMRC 547 million pound, leaving a balance of 223 million pound," the company said over the weekend.

But "the recovery from the pandemic has been slower than predicted" was the explanation given for seeking a deferral.

A comment from HMRC is awaited.

EOUK has a 16 per cent market share among fuel suppliers in the UK. In the past few days, there has been a severe shortage at Britain's service stations, with pumps either completely shut or reflecting long queues of motorists in a panic to fill up.

EOUK's refinery is in Stanlow near the north-west England cities of Manchester and Liverpool. It said that the sale volumes at its terminals there and at Northampton and Kingsbury - the last two being near London, where demand is by far the highest in Britain - over the last weekend were up 22 per cent against an average weekend pre-Covid.

On September 24 (Friday), when the distribution crisis really sunk in, sales volumes from the three terminals were up 14 per cent as compared to a normal pre-Covid Friday.

EOUK added: "More recently, though aviation volumes remain low, the road fuels market has started to return to more normal levels and as a result EOUK turned EBITDA (earnings before interest, taxes, depreciation and amortization) positive in early summer."

Shashi and Ravi Ruia owned EOUK employs 800 people at Stanlow. Since they acquired it in 2011, it claims to have invested $1 billion "in margin improvement and other efficiency initiatives to ensure the refinery remains competitive in a rapidly changing market".