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LP gas crisis: Shortages remain amidst Litro Chief’s exposé 

16 Apr 2022

  • LPG shortages to persist if long-term funding not secured
  • Litro Chair resigns, complains of interference and intervention by ministers
  • Claims 800,000 LPG cylinders issued to market in April
  • Says Litro Gas has incurred Rs. 2,600 m in losses due to pricing
  • Blames inability to hike prices on lack of funds to import
  • LAUGFS prioritises supply to health, industry, and commercial markets
By Maheesha Mudugamuwa The prevailing Liquefied Petroleum Gas (LPG) shortages are expected to ease for a while as the State gas importer, Litro Gas Lanka Ltd., is preparing to resume operations from tomorrow (18) with the receipt of $ 10 million emergency funding from the World Bank (WB), The Sunday Morning learns.  However, experts warned that shortages would remain until a proper long-term solution was implemented. Under WB funding, Sri Lanka is expected to receive a stock of 8,500 MT of LPG. In March too, Litro received a stock of 3,900 MT but long queues for LPG remained unchanged even on the day before the New Year. In January, Litro had invited bids for the procurement of 280,000 MT+/-20% of LPG for a 12-month period for the year 2022-2023. WB assistance to the LPG supplier comes amidst revelations made by Litro Chairman Theshara Jayasinghe regarding challenges faced by the once profit-making State-Owned Enterprise (SOE).  In a lengthy letter of resignation issued last week (14) addressed to the President (which had not been accepted or rejected at the time of writing), he highlighted interventions and interference by senior Government officials into the operations of the largest LPG supplier in the Sri Lankan market. Jayasinghe also accused former Finance Minister Basil Rajapaksa of failing to address the key issues which were raised with the Treasury by Litro Gas Ltd. Stocks shortage During the last few months, queues for LPG have lasted for hours in various parts of the country, with at least two deaths reported of persons waiting in line. Further, many in rural areas have shifted to traditional cooking methods and some in urban areas have started to use kerosene or electric cookers.   Even though Litro resumes operations tomorrow, experts predict that the expected stocks will only be sufficient for a small period of time and unless there is an uninterrupted funding channel for the sector, the shortages will continue as they have for the past several months. In a statement issued last week, Litro Gas Lanka has stated that its production and distribution operations were carried out till 13 April and that it had issued 800,000 LPG cylinders to the market in April alone. Further, it said it had distributed a total of 11,000 MT in April, including to factories, hospitals, and hotels. Litro had recently stopped operations due to LPG being out of stock. However, the State importer is expected to resume operations from Monday (18). As explained by Litro, the shortages experienced by the market during the New Year season were mainly due to the difficulties Litro faced in opening Letters of Credit (LCs) due to the prevailing foreign exchange shortages in March and also due to the high market demand in the absence of the supply from its competitor LAUGFS Gas. Furthermore, Litro stated that it had incurred a loss of over Rs. 2,600 million as the price of a domestic gas cylinder remained unchanged despite the need to raise it by around 60% due to the rupee depreciation and high fuel prices, as well as the gas price increase in the world market. As Litro has stated, measures are currently being taken with the intervention of the Government, receipt of WB funding, and expected funds from the International Monetary Fund (IMF). As the leader in the LPG sector, Litro Gas Lanka has over 76% of the market share, operating in an energy industry full of opportunities. Litro Gas Lanka provides LPG for over four million households in addition to supplying to multiple commercial and industrial sectors. The Litro Gas Lanka network consists of 42 distributors, approximately 14,000 point-of-sale locations, and 1,500 home delivery hubs that meet the LPG needs countrywide. However, the existing shortages are expected to last until the only private importer resumes its operations. LAUGFS stance LAUGFS is said to have more than 50,000 customers, 30 distributors, and 5,000 dealers while Litro Gas claims to have a 72% market share as of 2017. Nevertheless, as stressed by industry experts, Litro cannot meet the country’s domestic gas demand alone and therefore unless the private gas importer resumes imports, the shortage is expected to continue. Meanwhile, when contacted, LAUGFS Holdings Chairman W.K.H. Wegapitiya said that due to the current foreign exchange shortage in the country, LAUGFS had decided to supply a specific market, focusing mainly on commercial purposes. “At present, we are supplying to very specific markets such as restaurants, hotels, hospitals, and factories,” Wegapitiya told The Sunday Morning. He elaborated that in a crisis like the present one, focus should also be on local industries to ensure their smooth functioning. “Therefore, we decided to supply for industries such as ceramic and glass. Supplying for commercial purposes does not mean that we are depriving the domestic market.” Explaining further, the LAUGFS Chairman stressed that gas prices were fluctuating dramatically amid the prevailing economic turbulence. The prices are affected due to the world market prices and fuel prices, as well as the value of the rupee against the dollar.   He stressed that the world market prices of LPG had gone up by $ 137 per MT effective from 1 March and the value of most of the shipments for the LCs that had been opened for Rs. 203 per dollar had suddenly increased. As a result, local prices couldn’t be predicted by the time the orders are placed for shipment, explained Wegapitiya. The country experienced a severe LP gas shortage late last year as well, when LAUGFS suspended its operations, claiming it incurred losses due to the import and selling price difference. It insisted on a price revision so as to avoid incurring massive losses and to continue operations. After a few weeks of struggle, the Government decided to revise the prices of LAUGFS Gas. Accordingly, the Consumer Affairs Authority (CAA) permitted an increase in the price of LAUGFS LPG cylinders. The price of a 12.5 kg LAUGFS domestic gas cylinder was increased by Rs. 363 and the new price became Rs. 1,856. The 5 kg mini cylinder was increased by Rs. 145 and the price now is Rs. 743. Then again, following the rupee depreciation last month, it was reported that LAUGFS Gas had increased the price of a 12.5 kg LPG cylinder to Rs. 4,199. Also, a 5 kg domestic gas cylinder was increased to Rs. 1,680. The new price of a 2.5 kg gas cylinder is Rs. 672. The new prices were yet to be officially announced by the company. Litro price hike request Litro’s Jayasinghe earlier noted that steps had been taken to import LPG from India under credit, in order to maintain the supplies in the market for a period of time. He went on to urge the President to intervene and ensure that it took place accordingly. A few weeks ago, Jayasinghe told the media that Litro Gas had sought a price increase from the Cabinet as the firm had been hit by a foreign exchange loss, creating a cash deficit to pay for future shipments. “We have made a request to the Cabinet for a price increase. The gas that you buy in February is paid for in March. After the first depreciation, we lost Rs. 1.8 billion in one night. After that we lost Rs. 2.5 billion. Now we have the problem of how to find money for the next shipment. If we sell four ships of gas, we only get money to pay for three ships,” Jayasinghe told the media. Jayasinghe, who tendered his resignation last Thursday (14), claimed that since the day of his appointment on 6 July 2021, he had not received support from then Finance Minister Basil Rajapaksa. He had explained in the letter that he could not solve the ongoing LPG crisis by himself, noting that it needed the contribution of all economic experts in the country. Attempts by The Sunday Morning to contact Jayasinghe and officials from the Finance Ministry were futile.  Meanwhile, when contacted by The Sunday Morning, Treasury Deputy Secretary R.M.P. Rathnayake said discussions were ongoing to identify the possibility of allocating funds from the recently obtained $ 1 billion Indian Line of Credit for the purchasing of LPG to ensure a smooth supply to the market and thereby avert the existing shortages.   

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