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CAA firm on maintaining gas prices: Local suppliers to curtail gas supply

21 Mar 2021

  • Current prices causing supplier losses

  • Litro to lose 10 years' earnings if prices maintained 

  • Global crude price soars while rupee depreciates 

By The Sunday Morning Business Desk   With the Consumer Affairs Authority (CAA) and the Government standing firm on their decision to not increase the prices of gas at the moment, suppliers are likely to reduce local gas supply in the face of increasing crude oil prices in the global market, The Sunday Morning Business reliably learns.  Regardless of sustained lobbying by local gas suppliers to increase the prices of gas by Rs. 655, CAA has been quite adamant in its decision to maintain prices.  Speaking to us, Laugfs Gas PLC Chairman W.K.H. Wegapitiya stated that suppliers were waiting for a positive answer from the Government for about four months now, due to developments in the global oil market and depreciating local currency.  “We cannot hold prices for any longer. We will stop importing gases, as we cannot keep selling below cost, because we are right now incurring losses. If we stop importing, supply would be reduced. We cannot continue losing in the market anymore,” Wegapitiya added.  Meanwhile, Litro Gas Lanka Ltd. Director of Sales and Marketing/Corporate Affairs Janaka Pathirathna stated that while they might not curtail the local supply of gas, they are already enduring losses due to maintaining local gas prices.  “So far we have made huge losses, and if we maintain the same prices for about a month or two from now onwards, of course, we will lose everything that we have earned as a company for the last 10 years. Our cash flow will have huge issues,” the Pathirana added.  Litro Gas stated that the suppliers held discussions with the CAA, and have submitted their request to increase the local prices of gas.   “We are a government-funded private company. So far in history, we have not asked for a subsidy, hence we have not gotten any subsidy or any government funds for our company. This has been running as a private organisation, though the Government is holding majority shares,” the he added. Premier Mahinda Rajapaksa, who is also the Minister of Finance, on Wednesday (17) said that there is no need to increase the local prices of gas, as there is no shortage in the country.  In 2021, the International Energy Agency (IEA) reported that global gas demand is expected to increase by 2.8%. Meanwhile, Litro Gas maintained stable prices for more than a year, despite escalating global prices. Additionally, in the aftermath of the Covid-19 pandemic, markets across the world have been impacted by currency fluctuations, and international prices of LP gas, as one of the world’s most widely used energy sources, have seen volatility. According to Argus Media, commodity and energy price benchmarks, leading independent provider of energy and commodity price benchmarks, rising prices, and uncertain economic forecasts overshadow the LP gas industry globally.  The Argus pricing benchmark “Argus Far East Index” is used widely in Asia, while the Saudi Aramco Index is also used in countries such as Sri Lanka. While it is becoming more difficult to predict the pricing structure due to external factors, global indicators such as fluctuating world LP gas prices, currency fluidity, and industry demand may result in price variations, Pathirathna added. Commenting on the way forward for LP gas markets amidst Covid-19, the Argus report states that growth is expected in 2021, resulting in prices that are likely to continue rising until year-end. While seasonality will also drive demand, the Argus report also acknowledges that petroleum price reversals are likely to result in the uncertainty of global LP gas prices.


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