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‘Siyolit’ lights a gas war

02 Oct 2021

By Asiri Fernando The confusion over the controversial gas company Siyolit (Pvt.) Ltd. took another turn last week with senior Treasury officials claiming that the newly formed special purpose vehicle (SPV) was not scrapped. This came amidst reports that state-owned Litro Gas Ltd. had last week submitted alternative proposals to the Treasury following a protest about the new company. “We haven’t taken a decision to close it down. So far, it is not scrapped,” Treasury Secretary S.R. Attygalle told The Sunday Morning in response to a query regarding the status of Siyolit. He did not comment further on the issue, except to say that the “matter was being discussed”. Attygalle’s statement followed the statement reportedly made by President’s Secretary Dr. P.B. Jayasundera earlier last week, where he had indicated the new company was a no go. The indecision surrounding the Government’s move to merge both suppliers of liquefied petroleum gas (LPG) to the country comes at a time when the cost of living is skyrocketing. The situation is further compounded by concerns about fuel and gas shortages due to the ongoing foreign currency crisis. The cloud of uncertainty hanging over Siyolit was followed by allegations that some in the Government were trying to bankrupt state-owned Litro Gas and give an LPG supply monopoly to Laugfs Gas (Pvt.) Ltd. “They are trying to force us (Litro Gas) to bail out a bankrupt Laugfs Gas company and hand over an LPG monopoly to them. Laugfs is a white elephant, debt-ridden and mismanaged. A state enterprise that has performed well and paid their dues should not be crushed like this for the gain of a few individuals,” a senior official from Litro Gas told The Sunday Morning on condition of anonymity. “The Government has forced us to absorb significant losses from 2019 up to now by not allowing Litro to increase the price of a gas cylinder, which they allowed Laugfs to do. Between January and now, we have incurred losses close to Rs. 9 billion. Does the Government want to push us into bankruptcy?” he questioned, warning that if the status quo continued, the Treasury would have to loan Litro millions of US dollars to import gas soon. He alleged that there was a move by some in the Government to force Litro, which has an 80% share of the LPG market, to buy gas from their competitor, which controls 20% of the market. The Litro Gas official alleged that Laugfs Gas was heavily indebted to state banks and was seeking a way to stay afloat. “Eventually, many of the recommendations made by the cabinet committee to restructure the LPG industry may well lead to higher gas prices, lower investor confidence, and declining transparency. Litro may sink and be forgotten,” he opined. Concerns were also raised about the makeup of the proposed management structure for Siyolit, with the Litro Surakeeme National Unity (LSUN), a collective of Litro employees and members of civil society, questioning why the company with an 80% market share had only been allocated three director positions while Laugfs was afforded two. In a press release, the LSUN argued that Litro Gas had paid Rs. 13 billion in dividends and Rs. 34.5 billion in tax over the years, adding that poor policy decisions by the Government had negatively impacted the state-run enterprise. The LSUN stated: “However, by maintaining the minimum price of a domestic LPG cylinder between October 2019 and August 2021, Litro suffered approximately Rs. 8.5 billion in losses. Under the first recommendation in a parliamentary subcommittee report dated 27 June 2021, a price of a 12.5 kg domestic LPG cylinder was fixed at Rs. 1,493. “However, on 13 August 2021, the Consumer Affairs Authority (CAA) approved a price hike of Rs. 363 for Laugfs cylinders only. Due to such provisions not being afforded to Litro Gas, which is the largest player with 80% market share, the SOE (state-owned enterprise) currently absorbs a loss of Rs. 847 per cylinder amounting to Rs. 80 million a day and (approximately) Rs. 2.2 billion per month.” According to the LSUN, Litro Gas is faced with a multipronged crisis due to the Siyolit project. Firstly, Litro will continue to incur further losses due to the price of a cylinder not being determined by market forces. Secondly, Litro’s control was to be handed over to Laugfs Holdings, the LSUN argued. However, when contacted, Laugfs Holdings Ltd. Chairman W.K.H. Wegapitiya dismissed allegations of foul play and stressed that the project was in the best interest of the country. “Litro has storage for only three days’ worth of supply. We (Laugfs) have a 30,000 MT storage capacity in Hambantota. If we synergise, we can deliver at an optimised level,” Wegapitiya stated, charging that Laugfs can obtain LP gas at a lower price than Litro. Wegapitiya said that Laugfs was waiting for an official word on the status of Siyolit. He blamed persons with vested interests for trying to “sabotage” an attempt at streamlining the national LPG supply and reducing forex losses. Speaking to The Sunday Morning, Janatha Vimukthi Peramuna (JVP) parliamentarian Sunil Handunnetti questioned the legality of Siyolit and blamed the Government for acting in breach of the law. “How can this company be created? It is illegal. This company was established without cabinet approval,” Handunnetti charged, stressing that the Cabinet had only appointed a subcommittee to look into the procurement of LPG for Sri Lanka. With a range of concerns hanging over the Treasury’s plan to embark on the Siyolit journey and uncertainty within the Government on the project, the public may once again have to “pay the price” for a costly blunder.


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