Don’t allow Litro to become a sinking SOE: Watchdog

BY SANATH NANAYAKKARE

An organisation set up for making sure that Litro Gas conducts its operations and business in a viable and profitable manner fears that an impending reform strategy would compromise the Company’s capacity to turn around as a profitable State-Owned Enterprise (SOE).

Litro Surakime Jathika Ekamuthuwa (LSJE) or Litro Surakeeme National Unity, a collective of employees and members of civil society seeking to preserve the organisation, argues that Litro is well poised to compete with any multinational counterpart especially with its state-of-the-art bunkering facility in Kerawalapitiya with a capacity of 8,000 MT which can singlehandedly cater to the total national demand due to the efficiency in terms of management and operations.

“On a monthly basis, Litro’s bunkering facility handles approximately 35,000 MT of LPG and provides direct employment to over 225 personnel. The organization remains one of the greatest contributors to the local economy with an annual turnover exceeding Rs.50 billion. Litro also pays Rs.13 billion in dividends and Rs.34 billion in tax. However, by keeping the price of a domestic LPG cylinder at a minimum price between October 2019 & August 2021, Litro has suffered approximately Rs.8.5 billion in losses,” they say.

They further said: “Litro’s current crisis is two-fold: 1) Litro to incur further losses due to price of a cylinder not being determined by market forces. 2) Litro’s control to be handed over to Laugfs Holdings as per the recommendation of parliamentary subcommittee.”

“Experts cite both scenarios as being injurious to the organisation. Under recommendation 1 of parliamentary subcommittee report dated 27th of June 2021 price of a 12.5kg domestic LPG cylinder was fixed at Rs.1493. However, on 13th of August 2021 the Consumer Affairs Authority 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 currently absorbs a loss of Rs.847 per cylinder amounting to Rs.80mn a day and Rs.2.2bn per month.”

“They call to question the intentions and integrity of recently formed LPG buying firm Siyolit (Pvt) Ltd headed by Susantha de Silva as CEO/Chairman. It has been observed that the Directorate of this firm is lopsided with two directors being allocated to Laugfs which has a 20% market share while Litro, with over 80% market share, only being allocated three directors.”

“Further, Siyolit (Pvt) Ltd insists on buying from Litro only via Laugfs’ bunkering facility which necessitates transporting LPG from Litro’s facility in Kerawalapitiya to Hambantota by sea. Litro is compelled to obtain the necessary infrastructure for this process from Laugfs at an additional cost. Litro’s bunkering facility in Kerawalapitiya was built following comprehensive feasibility studies favoring the demand from the western province which amounts to 60% out of total requirement. It is feared that these myopic proposals may render the Kerawalapitiya facility, which is a national asset, obsolete in the long run due to underutilization.”

“As per Cabinet recommendations, a committee has been appointed to look into restructuring of the LPG industry for a trial period of six months. Many recommendations slated to be implemented by the committee, however, disproportionately disadvantage Litro. This may result in stifling investor confidence, raise issues regarding transparency and impact the per unit cost due to added overheads. It is feared that the outcome of this ‘restructuring’ would cause for Laugfs to thrive and Litro to inevitably shrink due to neglect and/or overt interference.””Taking the above into account we seek a sustainable solution to the crisis faced by Litro without infringing on its independence which has proved to have augured well for the organization prior to its downturn in 2019.”

“The real motivation behind seeking to make cash-rich Litro with 80% market share in LPG sector dependent on the competitor with only 20% share is a cause for concern as Litro has the capacity to not just recover itself but also to manage the competitor’s infrastructure profitably bailing out the institutions which financed this endeavor thereby,” they say.

The co-signatories to the above statement were President – A K Nalin Samantha, Secretary – J A D S Ternace Appuhamy, Treasurer – A P G S Jayakody – officebearers of ‘Litro Surakime Jathika Ekamuthuwa’.