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CAA Executive Director on Litro and Laugfs
CAA Executive Director Thushan Gunawardena[/caption]
Within a period of less than a month, Sri Lankan officials went through a rollercoaster ride with the announcement of travel restriction due to the uprising number of Covid-9 cases, revision of fuel prices, sinking of the Singapore-flagged MV X-Press Pearl vessel, desperate agreements for swaps, and the Colombo Port City Economic Commission Bill, among several others.
However, one such major incident that was buried immediately after hitting the spotlight was when the Consumer Affairs Authority (CAA) discovered nearly 10 Litro Gas cylinders that were to be sold to customers, weighing less than the marked weight of 12.5 kg, during raids carried early this month.
While it is understandable that there could be errors when manufacturing the product, the main concern raised among the people was the recent actions that were portrayed by two leading gas companies in Sri Lanka, intriguing the CAA to dig deeper into the situation.
Legal implications
Speaking to The Sunday Morning Business, CAA Executive Director Thushan Gunawardena expressed numerous concerns with regard to Laugfs Gas PLC and Litro Gas Lanka Ltd. and their method of operating their businesses during an ongoing pandemic.
Gunawardena said it is the recent public announcement on national television made by Litro Gas Chairman Anil Koswatte, where he said that they are working with Laughs Gas to position gas in litres, which brought the matter to light. “They are directly violating the CAA Act. Two dominant companies cannot be in an agreement as this could result in price-fixing, therefore making the people in the country vulnerable, left with no option but to purchase the product,” he explained.
With reference to research, the composition of liquefied petroleum (LP) gas varies from country to country and is generally decided based on the climate conditions. For example, a propane-rich mixture is used only in cold countries while a butane-rich mixture is more suitable for tropical countries like Sri Lanka. Reports state that butane has a higher fuel value than propane and makes it ideal for domestic use, as a propane-rich mixture carries a risk during handling it.
Commenting in this regard, Gunawardena said the engraved description on the cylinders of Litro and Laugfs categorically says that the weight of butane and propane, which is another violation as both companies’ samples tested by Intertek, has indicated a 50/50 composition. “Litro Gas claiming that reducing butane in the new 18 litre cylinder allows for more cooking is factually incorrect, given that the fuel value per square metre of butane is higher than propane. Hence, there is a dire need to regulate the propane/butane composition in the country,” he stated
Furthermore, explaining another issue, Gunawardena spoke about several complaints received from the general public with regard to cylinder valve leakage due to the composition change that could pose a serious hazard and possible loss of life, if this is true.
“Section 7(a) notes that the objects of the authority shall be ‘to protect consumers against the marketing of goods or the provision of services which are hazardous to life and property of consumers’. Therefore, we need to formally engage Sri Lanka Standards Institution (SLS) to publish the required LP gas standards as per the SLS Act No. 6 of 1984 and adopt the standard under section 12(2) of the CAA Act by publishing a gazette informing the adoption of the standard set by SLS without further delay,” he elaborated.
Writing an official letter to the relevant authorities of Sri Lanka, Gunawardena has stated: “If we do not take action to enact new regulations for the LPG sector to adequately scrutinise the manufacturing process we are in contravention of the CAA Act for inaction by virtue as stated in Sections 12 (1) and (2) of the CAA Act. Hence, I would emphasise the fact that the responsibility is with us as the CAA and the State Minister and line minister to address the deficiencies and act on them immediately due to the risk factors typically associated with LPG composition.”
He further noted that the butane and propane composition should be regulated immediately, mainly considering the safety and efficiency factors and further the optimum amount of gas that can be filled versus the capacity of the cylinder, as this indirectly increases the carbon footprint of the country due to the number of short-filling intervals typically associated with transportation increasing expenses to the country.
Another major concern raised recently is the shortage of gas supply in the market. Speaking to The Sunday Morning Business, CAA Chairman Maj. Gen. (Retd.) D.M.S. Dissanayaka said the Authority has received over 500 complaints from consumers with regard to the shortage issue, followed by the CAA instructing Litro to supply the 12.5 kg domestic gas cylinder as per the market demand.
Meanwhile, speaking to us on an earlier occasion last month, Movement for the Protection of Public Rights Convener Asela Sampath alleged that Litro Gas Lanka has ceased the supply of the 12.5 kg domestic gas cylinder in order to promote its new 18 litre Premium Hybrid cylinder.
“Firstly, they converted a 12.5 kg domestic gas cylinder to an 18 litre Premium Hybrid cylinder. My question is how gas is measured in litres. Secondly, this 18 litre Premium Hybrid cylinder has caused great damage to the industrial sector as they use high-pressure regulators, whereas the new gas cylinder burns fast. We can see a shortage of 12.5 kg domestic gas cylinders, and the CAA has also received complaints regarding the shortage,” he said.
During the same time last month, Litro Gas Media Spokesman Venuri Perera told The Sunday Morning Business that there is no shortage of the 12.5 kg domestic gas cylinder in the market.
“We have supplied 12.5 kg domestic gas cylinders to the market as per the demand, and we are not either trying to showcase a deficiency or promote the 18 litre Premium Hybrid cylinder. Both cylinders are in the market. If the consumers cannot obtain them, they can always contact our customer hotline at 1311. Consumers could avail home delivery by reaching us via the Litro Home app,” she said.
However, commenting with regard to this situation, Gunawardena said that most of the cylinders the CAA seized were short of 100-150 g, which is a straight profit in the bottom line, confirming that the aforementioned deceitful act leads to absolute monetary gains for the gas company, as the company is clearly pumping less gas into the cylinder purposely.
Quoting the CAA Act No. 9 of 2003, Gunawardena said that Litro has breached multiple sections of the Act, including Section 31. He explained the severity of the matter saying it is a disregard to the law. “There are multiple violations in terms of that (selling underweight cylinders); I can quote Sections 13, 18, 31, and 32,” he said, adding that erasing the markings of the gas cylinder was also a concern.
Will the gas price increase?
The possibility of gas prices increasing in the near future is extremely high, as both Laughs Gas and Litro Gas have been constantly behind the CAA and other relevant authorities to increase the gas price.
Speaking to The Sunday Morning Business in March, 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.
“Laugfs has incurred a loss of Rs.1.4 billion in the last two months due to maintaining stable prices. We cannot hold prices any longer. We will stop importing gases, as we cannot keep selling below the 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 said.
Meanwhile, Litro Gas Lanka Director of Sales and Marketing/Corporate Affairs Janaka Pathirathna, also in March, said 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.
Pathirana further 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 got any subsidy or any government funds for our company. This has been running as a private organisation, though the government is holding majority shares,” he added.
Even though both companies were requesting a price hike, the CAA and the Government stood firm on their decision to not increase the prices of gas. Accordingly, Prime Minister Mahinda Rajapaksa, who is also the Minister of Finance, on 17 March said that there is no need to increase local prices of gas, as there is no shortage in the country.
Nevertheless, speaking in this context, Gunawardena revealed that even though Litro Gas is whining about incurring losses, they spend around Rs. 571 million on sales and advertising activity alone.
“For a company that is holding 75% of the market (share) and selling an essential item, why do they need Rs. 571 million for advertising? If there is a valid reason where they are losing money, we have no objection to increasing the prices, which is entirely up to the Government. But we can’t allow a situation where the gas company systematically and purposefully flouts the law of the land by factually providing incorrect information and trying to deceive the regulator,” he stressed.
He said the gas price could be revised in the future, adding: “The problem during the pandemic crisis is that I do not see these companies taking any austerity measures to reduce their costs of advertising, bonus, etc.”
Prevention methods
One of the recent preventive measures taken by the CAA was to conduct raids to maintain the gas standard in Sri Lanka, while another was the recent extraordinary gazette notification that was issued directing all manufacturers and traders of gas to ensure adequate quantities of the domestic cylinders weighing 12.5 kg are available for sale at all sales outlets islandwide.
Speaking on the matter further, Gunawardena emphasised that it is extremely important for Sri Lanka to have proper regulation with regard to introducing new products to the market. He said that at present, the companies can release a product and inform the CAA. “We have to draft a new regulation. I have already informed the CAA Chairman and other relevant officials regarding this. Hence, how fast this will come into action depends on the Ministry,” he said.
Gunawardena, in conclusion, said that gas companies should be regulated from compositions, pricing to their distribution all from scratch in order to maintain CAA standards and to protect the consumers of Sri Lanka.