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Laugfs requests further price hike of Rs. 450

19 Sep 2021

  • Requests come amidst financial issues
Laugfs Gas PLC has earlier this week requested a further price hike of Rs. 450 per cylinder from the State Ministry of Consumer Protection, as a measure to tackle part of the problems the company is currently facing, The Sunday Morning Business learns. Speaking to us, Laugfs Gas Chairman W.K.H. Wegapitiya said the company is looking for at least a Rs. 450 increase per cylinder to survive during this crisis. Earlier this week, State Minister of Co-operative Services, Marketing Development, and Consumer Protection Lasantha Alagiyawanna said that gas companies have requested for a price increase to keep up with the global market prices. However, Wegapitiya noted that every month, the company gives a price application including the average cost element in the previous two months to the Consumer Affairs Authority (CAA) seeking a price increase to cover the cost, and the Rs. 450 increase is based on the average cost incurred by the company in the last two months. The CAA permitted a Rs. 363 price increase on 12 August, though Laugfs has asked for a Rs. 475 rupee hike in June based on the average prices in May and June. Liquefied petroleum (LP) gas prices of a 12.5 kg cylinder was increased to Rs. 1,856 and a 5 kg cylinder to Rs. 743 in the Colombo District. The CAA approved the price increase only after Laugfs halted supplies, but the shortage existed as the price increase was not sufficient to cover the losses. Speaking about the challenges faced, Wegapitiya said that it has become a very difficult task for the company to get sufficient forex to open Letters of Credit (LCs) to import products and raw materials as well as finished products such as LPG. He added that their buyers want LC confirmations due to the lack of forex in commercial banks and the downgrading of the country’s ratings. He further added that finding a bank to confirm LCs has become a challenge that is harder to manage than the cost and pricing issues. He confirmed that it cost about $ 10 million at least for importing required products. Wegapitiya further stated that as the Sri Lankan rupee has drastically depreciated against the US dollar, the cost of every import has increased, which adds to the increase in prices in the global market as countries that have completed their vaccination drives are returning to their normal economic activities. He said global prices have been rising in an abnormal manner in the last eight to nine months. Moreover, he noted that with the world now heading towards the winter season, LP gas and other petroleum products will keep on increasing till January-February 2022. Apart from these challenges, he said the current Government is regulating the market without looking at the hard facts and fundamentals. He also said the Government is looking at a more consumeristic point of view, which has reflected in most of the industries now. “As a result, there is a shortage of milk, gas, sugar, and other food items. So we have to operate within such an adverse environment,” he further explained. However, he said there is a pricing formula placed for gas which the CAA is not using. The pricing formula was based on agreement between the gas company and the CAA, where the CAA is legally obliged to grant price increases on the basis of the pricing formula approved by the Supreme Court in 2007. He said in the current situation, people are spending hours and money in search of gas while such problems could have been averted via a price increase. “Increase the price. If it is high, people will not consume. The Government wants to protect the consumers, but ultimately, there wouldn’t be an industry remaining,” he said. When inquired about the request made by the gas companies for a price hike from State Ministry of Co-operative Services, Marketing Development, and Consumer Protection, its Secretary K.A.D.S. Ruwanchandra denied any knowledge of any such request.


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