News

Litro receives approval for bulk-buying

  • Pledges to reduce queues with new strategy

Sri Lanka’s national liquefied petroleum gas (LPG) provider, Litro Gas Lanka Ltd., has received Government approval for bulk-buying as opposed to ad-hoc purchasing to manage the domestic demand moving forward sans long queues.

The spokesperson for Litro Gas Lanka said that the Government had given it the green light to pursue the proposed plan in order to mitigate the current national shortage of LPG.

“Despite the shortages, Litro Gas Lanka has consistently catered to the demand from BOI, Export Processing Zones, and other export-oriented industries and sectors that are critical to the economy bringing in much-needed forex,” the spokesperson said. 

“Moreover, Litro Gas Lanka single-handedly managed to cover the country’s critical industries – including the HORECA (Hotel, restaurants, and catering) category – undertaking the challenge of catering to its own demographic as well as the market segment dependent on its competitor, the only other LPG supplier, for the duration of three to four months it was unable to actively meet the demand.” 

Detailing the negotiation process for the contingency order, he said that SIAMGas of Singapore offered the lowest rate of $ 96 as the shipping cost per metric tonne (MT) of LPG for the 2022/2023 tender, but failed to release the consignment until a standby Letter of Credit (SBLC) to the value of $ 30 million was furnished. 

Further, SIAMGas had also informed that the required quantity of 15,000 MT could not be provided, but 6,600 MT could be arranged instead, 10 days from the date of the LOC. It was also informed this consignment would be provided at $ 112 instead of formerly quoted $ 96.

As such, Litro Gas opted for the second-lowest bid of a minimum quantity of 100,000 MT at $ 129 from Omani Trading (OQ Trading) based on the decision taken at the Cabinet meeting held on 8 June – taking into account the feasibility and time considerations. The $ 17 difference between the two aforementioned bidders translates to less than Rs. 80 per cylinder, which was not seen as a significant burden proportional to the inconvenience faced by the public due to the lack of LPG in the market.

Litro Gas Lanka clarified that SIAMGas was left out from this contingent purchase not due to an issue involving commissions, as claimed by certain media reports, but rather due to the stipulations and demands put forward by the supplier at this critical juncture. Logistical limitations such as not having adequate vessels for delivery was also a reason for ruling out SIAMGas as a supplier for the contingency shipment as well as the long term., Litro said 

The total requirement would have needed four vessels over a period of six weeks, which SIAMGas could not confirm. Even the vessel allocated for the spot (contingency) was over 26 years old. These factors too contributed to Litro Gas looking for more reliable, dependable suppliers for the short and long terms.

The initial approval to secure LPG from SIAMGas was granted by the Cabinet two months ago during the tenure of the previous Chairman but did not materialise and it was against this backdrop that the tender was awarded to the next best alternative, OQ Trading, to expedite the process. 

During the period November 2019 to December 2022 it has cost Litro Gas Lanka a staggering Rs. 11.1 billion to maintain the price of an LPG cylinder at a constant rate so that LPG was affordable to the average household, which coincided with Covid-19 lockdowns. 

Litro Gas Lanka stated it is one of the most profitable State-Owned Enterprises (SOEs) in Sri Lanka employing a cadre of only 225 permanent staff. The enterprise made available a dividend of Rs. 13 billion during the last decade to the National Treasury, which is generally used for nation-building activities. Furthermore, the company has paid Rs. 34.5 billion as taxes during the past decade.