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Litro quits Siyolit, moots new solution

a year ago

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  • Urges storing gas at Kerawalapitiya, not Hambantota
  • Proposes 3 options for Hambantota terminals 
By Pamodi Waravita Litro Gas Lanka Ltd. has officially quit the Special Purpose Vehicle (SPV) Siyolit (Pvt.) Ltd., which was mooted by the Treasury Department, and has instead, proposed a number of new solutions to reduce the costs incurred in the purchase of liquid petroleum gas (LPG) to the country, Litro Gas Director – Sales and Marketing Janaka Pathirathna told The Morning yesterday (3). “We have officially stepped back from Siyolit, and we are not willing to work with Laugfs Gas (Pvt.) Ltd. This was not a decision made because we are anti-Government. Litro has been consistently supplying the consumers with gas, while Laugfs Gas cannot even be found in the market. We just want the best solution,” said Pathirathna. The withdrawal of Litro effectively terminates Siyolit, as it being operational without the participation of both LPG players in Sri Lanka would defeat its purpose. Siyolit was originally meant to be a joint company which would allow Litro Gas (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 secure them at a cheaper rate than the present. The SPV was also meant to include directors from both Litro Gas 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, leaving it “at the mercy of Laugfs”, according to high-level officials. Once these concerns were communicated to the Secretary to the President Dr. P.B. Jayasundara by Litro, he had informed Litro to propose an alternative solution to replace the proposed SPV.   “So we presented our proposal to Dr. Jayasundara last week. 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 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 Terminals are mortgaged to the State-run People’s Bank. Pathirana 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 National Unity questioned the integrity of the proposed Siyolit company, which was, according to official sources, due to be headed by Susantha De Silva. 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”.  Thus, the Unity warned that if the Treasury Department does not grant monetary assistance to purchase LPG, Litro Gas 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 and Laugfs Gas have been requesting the Government that they be allowed to increase local prices as well. Although the Government rejected these requests multiple times, it finally allowed Laugfs Gas to hike the LPG price by Rs. 363 per 12.5 kg cylinder.

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