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Auditor General report on Litro tender to P’ment soon

16 Sep 2022

  • Former COPE Chair Charitha Herath questions Litro - Oman Gas Company deal
  • Litro Chair rejects allegations as ‘baseless’, says World Bank satisfied
BY Safrah Fazal   The Auditor General’s (AG) report on the allegations related to the procurement of liquefied petroleum gas (LPG) – specifically pertaining to the basis for cancelling the term tender and the reason why the Oman Gas Company, which had quoted $ 129 per metric tonne (MT) of LPG, was notified of the spot tender 12 days prior to the Siam Gas Trading Company, which had quoted a much lower rate of $ 112 – is under preparation, and will be ready over the course of next week, well-placed sources told The Morning yesterday (15). “In roughly a week’s time, the report on the LPG procurement should be ready. It will be finalised soon and presented to Parliament,” sources disclosed. Speaking at a media briefing yesterday, former Committee on Public Enterprises (COPE) Chairman and incumbent MP Prof. Charitha Herath raised concerns over the cause for halting the term tender midway, which was being processed earlier this year, and regarding why a company that was willing to provide LPG at $ 112 per MT was notified of the spot tender 12 days after the company that had quoted $ 129 per MT, for which a portion of the payments were to be made through funds received by the World Bank (WB). He stated that the National Audit Office was preparing a report on these matters. When The Morning contacted Litro Gas Lanka Ltd. Chairman Muditha Peiris in this regard yesterday, he responded that Litro Gas Lanka has been conducting its affairs in a transparent manner in line with all the procurement guidelines and the guidelines put forward by the WB, and therefore rejected all allegations levelled against Litro as “baseless”. In response to the query by The Morning as to the reason for the cancellation of the term tender, Peiris said: “The term tender was not given to Siam Gas Trading or any other company because it was cancelled completely. The reason for this was that Siam Gas Trading has been insisting on a standby letter of credit (LC), which the banks refused to issue due to the country’s financial crisis. There were several e-mails exchanged between Litro and this company, asking them to come up with alternative payment terms that are acceptable to the country.  “The reason why there were many people lined up outside gas stations was because these discussions went on for 45 days. Other than through a standby LC, they didn’t want to supply LPG to us, and that’s why the Cabinet of Ministers had to evaluate a different supplier, although they quoted a slightly higher price than Siam Gas Trading. There were no other alternatives.”  He further noted that the request for a standby LC led the Cabinet to consider opting for a spot tender for a period of three and a half months.  “In this case too, Siam Gas Trading could only offer 6,600 MT, which is sufficient for only five to six days. Meanwhile, the Oman Gas Company agreed to supply according to our requirements. I think that this was the best decision that was to be taken at the time. This helped Litro address the LPG crisis. All this occurred before I took over office on 15 June.” When The Morning further queried Peiris as to why no gas shipment arrived in the island during June, he replied: “We finalised the decision on the supplier by mid-June. I’m not too certain of the date, but it is in June that we imported nearly 7,000 MT from our previous supplier. For the rest of the month, we wanted to order 15,000 MT of LPG.” He further noted that after Cabinet decided to award the tender to the 100,000 MT supplier, Siam Gas Trading had repeatedly written to Litro requesting to reopen the tender once again, providing various terms and conditions that they had not agreed to previously.  “It is these letters that some persons use to hurl allegations at us, charging that we did not respond to this company’s offers.” In terms of the allegations made by Herath, who charged that Litro had requested a quote for the spot tender from the higher term tender bidder (Oman Gas Company) on 19 May, prior to the lowest bidder (Siam Gas Trading) on 27 May, Pieris stated that it had taken place before he assumed duties as Litro Chairman.  “However, my assumption as to why that happened was that the Oman Gas Company was the supplier at the time, so while the tender process was ongoing, we were obtaining supplies from this company. Therefore, the Cabinet may have decided or given a direction to obtain a quote from the Oman Gas Company too, because while the conversation with Siam Gas Trading was taking place, which was for a period of 45 days, we had to procure products from elsewhere.” Regarding Litro’s alleged misuse of WB funds, he added: “The WB has high standards. We have to adhere to their standards in order to receive funding. They are very satisfied with our processes and actions with regard to the procurement process as well as the selection of the supplier and the distribution process. In fact, six representatives were here one and a half weeks ago, and appreciated our efforts. We also thanked them for their contribution. At present, we are working together with the WB in the distribution of LPG.” At the COPE meeting with Litro Gas Lanka, held on 5 July, it was revealed that Litro had obtained the approval of the Cabinet for the procurement of LPG for June at $ 129 from Oman Gas Company, overlooking an alternative proposal of $ 112 from Siam Gas Trading Company. At the meeting, Peiris stated that Siam Gas Company was rejected on the basis that it requested payment through a standby LC, and because it could only provide 6,600 MT of LGP, as opposed to Litro’s requirement of 15,000 MT. He added that Oman Gas Company was hence chosen despite their higher rate, and that this company had stated that it would provide 100,000 MTs of LPG to the island. Herath, responding to Peiris, said: “You represent the State in ensuring that you secure LPG for the public. What your company (Litro) did was that you asked the relevant supplier for a quantity that was clearly unattainable, and then you rejected it. Ultimately, you purchased gas at a price of $ 129 when you could have purchased it at $ 112. If you calculate the losses, for how many more months could we have purchased LPG?” Meanwhile, the officials of Litro – who stated that they were uncertain as to which supplier they should choose, and had hence put forward a Cabinet paper providing the two options to Cabinet, who then chose the company that had quoted a higher rate – were also accused by Herath of misleading the Cabinet.  “You have not asked the Cabinet to choose between the two suppliers. You merely provided the details and asked for approval to procure LPG from the Oman Gas Company,” Herath charged.


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