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Gas price hike imminent 

06 Oct 2021

  • Alagiyawanna blames Siyolit’s inactivation, world prices
  • NPP queries whether Siyolit would be reactivated 
BY Pamodi Waravita Citing the nonfunctioning of the Treasury Department’s newly formed special purpose vehicle (SPV) gas company Siyolit (Pvt.) Ltd., despite the Government’s best efforts, and the gas price increases in the world market, the Government announced that a gas price hike locally would hence be imminent. This was informed by the Co-operative Services, Marketing Development, and Consumer Protection State Minister Lasantha Alagiyawanna while speaking in the Parliament yesterday (6). Alagiyawanna said yesterday that although the three representatives from Litro Gas Lanka Limited had resigned from the Board of the Treasury Department’s newly formed special purpose vehicle (SPV) gas company Siyolit (Pvt.) Ltd., thus rendering the latter company inactive, Siyolit still remains an effective solution to ensure that the price of gas is kept affordable for consumers. “The three officials from Litro Gas Lanka resigned from the Siyolit Board and therefore it is currently inactive. They had informed the President’s Secretary Dr. P.B. Jayasundara and the Treasury Secretary S.R. Attygalle that they can bring gas at a price lower than what was proposed by Siyolit. This has been approved and now Litro Gas Lanka has taken up this responsibility,” said Alagiyawanna in Parliament yesterday.  He added that he considers Siyolity as a productive proposal and invited the Committee on Public Finance and the members of the Opposition to consider it as such. “Gas is being imported separately by Litro Gas Lanka and the privately owned Laugfs Gas PLC. Litro can currently store 8,000 metric tonnes (MT) of gas. During the import process, the supplier in Oman sends the stocks to the Maldives, which then comes to Sri Lanka through smaller ships. Thus, we pay about $ 70-110 more per MT of shipment than what is required. Siyolit would have jointly brought down the gas for both the companies (Litro Gas Lanka and Laugfs Gas) at a lower cost. None of the three players in this agreement – Laugfs Gas, Litro Gas Lanka, or the supplier from Oman – liked this proposal. But we are a responsible Government and we wanted to bring it at a lower cost. Ultimately, we will have to increase the gas price because the world price is increasing.” Alagiyawanna was responding to National People’s Power (NPP) Leader and Parliamentarian Anura Kumara Dissanayake’s allegation that the survival of Litro Gas Lanka was threatened by the formation of Siyolit, which would have required Litro Gas Lanka to depend on the Laugfs Gas terminals at Hambantota to store and transport gas, thus leaving the price of gas and the stake of the public good in the hands of the private company. “The first Cabinet paper about the gas issue was issued by Trade Minister Dr. Bandula Gunawardena and Prime Minister Mahinda Rajapaksa. A Cabinet Sub-Committee was appointed to look into the Cabinet paper, following our questions about it. Although the Sub-Committee included Dr. Gunawardena, Health Minister Keheliya Rambukwella, Environment Minister Mahinda Amaraweera, Energy Minister Udaya Gammanpila, and Water Supply Minister Vasudeva Nanayakkara, only Dr. Gunawardena, Amaraweera, and Nanayakkara have signed the report by the Sub-Committee which proposed the formation of Siyolit. The Laugfs Gas terminals are Rs. 30 million in debt to state banks. Although the Director Board of Siyolit met twice in August, there has been no agreement or Act to formalise or legalise this matter. It entirely functioned on the power given to it by the Sub-Committee. Our question is why a financially challenged company – Laugfs Gas – was given the power to store and transport gas for the state-run company. Would it not have opened the door for the private company to dominate the market and the market decisions, thus leaving both Litro Gas Lanka and the consumer at the mercy of Laugfs Gas? You mentioned that Siyolit is now inactive. Will it be made active again at the whim of the Sub-Committee? What is the Government’s policy on this matter?” questioned Dissanayake. Alagiyawanna said that if Siyolit is to become active again, a Cabinet paper will be passed in this regard. During the same debate, Gammanpila told the House that he had resigned from the aforementioned Sub-Committee, which is why his signature had not been present in the report that proposed the formulation of Siyolit. Litro Gas Lanka Director – Sales and Marketing Janaka Pathirathna told The Morning recently that Litro Gas Lanka has officially quit the Siyolit, and has instead proposed a number of new solutions to reduce the costs incurred in the purchase of liquefied petroleum gas (LPG) for the country. “Our first solution is that we utilise the Kerawalapitiya storage facility by transporting gas directly there after a ship to ship transfer. Currently, the freight cost is about $ 105. Through this method, we can reduce it to about $ 50. The previous solution, to store it at the Laugfs Gas Hambantota terminals through Siyolit, only reduces the freight cost to $ 80,” said Pathirathna.   An initial proposal to the Government by Laugfs Gas, as seen by The Morning, noted that the Laugfs Gas terminals are mortgaged to the state-run People’s Bank. Pathirathna added that the proposed solution for utilising the Hambantota terminals has three options: “The Hambantota terminals could either be rented out or leased out. Alternatively, it could be bought in a joint partnership with an international player.” On a previous occasion, the Litro Surakeeme (Protection) National Unity organisation questioned the integrity of the proposed Siyolit Company, which was, according to official sources, due to be headed by Susantha De Silva. Siyolit was originally meant to be a joint company which would allow Litro Gas Lanka (which holds about 70% of the market share) and Laugfs Gas (which holds about 30% of the market share) to jointly make LPG purchases and to secure them at a cheaper rate than the present situation. Siyolit was also meant to include directors from both Litro Gas Lanka and Laugfs Gas. However, it ignited controversy over the past month, amidst allegations that its proposed operational model would harm the state-run Litro Gas Lanka, leaving it “at the mercy of Laugfs Gas”, according to top officials. Once these concerns were communicated to Dr. Jayasundara by Litro Gas Lanka, he had then informed Litro Gas Lanka to propose an alternative solution to replace the proposed Siyolit.  Meanwhile, in a media communiqué on 1 October, the Litro Surakeeme National Unity said that the “decision to not increase gas prices parallel to cost fluctuations during the past nine months resulted in a loss of Rs. 10.5 billion for Litro Gas Lanka”. Thus, the Unity warned that if the Treasury Department does not grant monetary assistance to purchase LPG, Litro Gas Lanka will not be able to import LPG from November onwards. Pathirathna said that the cost per gas cylinder would have to be increased by at least Rs. 1,500 for the net cash flow to be positive. However, he claimed that, as per his knowledge, the current increase proposed by the Government is only Rs. 550. While global market prices of gas have increased significantly, both Litro Gas Lanka and Laugfs Gas have been requesting the Government that they be allowed to increase local prices as well. Although the Government rejected these requests on multiple occasions, it finally allowed Laugfs Gas Lanka to hike the LPG price by Rs. 363 for the 12.5 kg cylinder. 


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