News
Litro Gas grappling with billions of rupees in losses as govt. still undecided on LPG price hike
by Suresh Perera
With staggering losses running into Rs. 3.8 billion (Rs. 3,800 million) over the past three months, Sri Lanka’s biggest importer and supplier of Liquid Petroleum Gas (LPG) is in the throes of a grave financial crisis as the government continues to dilly-dally on the demand for a substantial increase in the price of cooking gas.
“There’s no option other than to absorb the mounting losses as no price revision has been granted so far”, says Anil Koswatte, Chairman/CEO of Litro Gas Lanka.
“We are facing an uphill task in continuing operations amidst the financial difficulties”, he noted.
LPG prices zoomed in the global market over the past quarter with a ton selling at a new high of US$ 600.
“There’s a ray of hope now that international prices will reduce further”, Koswatte said, referring to the marginal dip over the past week with pricing per tonnage settling at US$ 539.
Litro Gas has sought a Rs. 700 increase per domestic cylinder in a desperate bid to at least cover procurement costs, but the government go-ahead has still not been forthcoming, a senior official said.
“The more people buy cooking gas, the more the losses we suffer as 700 rupees are lost on every cylinder purchased”, he explained.
Litro’s biggest marketing segment is the domestic household market, which translates into 83% of total sales.
Asked whether a government bailout has been sought as, with billions of rupees in accumulated losses, Litro Gas was being pushed towards a cash crunch, the Chairman said that as a company, Litro Gas cannot expect a subsidy from the Treasury.
“Anyway, we are trying to work out some relief and a meeting has been scheduled to examine the possibility of tiding over the situation”, Koswatte noted.
In terms of the law, Litro Gas, though a private company, cannot increase the price of domestic LPG cylinders without the approval of the Consumer Affairs Authority (CAA). However, industrial LPG cylinders are excluded from the price control mechanism.
There’s still no word from the government on the price revision on domestic gas cylinders that was sought about two months ago, a senior official said.
“Even if a price increase is finally granted, we won’t be able to recoup our losses”, he pointed out.
It is true that at a time the government has come under fire over the spiraling cost of living, increasing the price of cooking gas will make a bad situation worse, he admitted.
However, there should be a level playing field for companies also to remain viable to continue their uninterrupted services to the public, he reasoned.
Sri Lanka Insurance Corporation (SLIC) is the primary shareholder of Litro Gas Lanka Limited with 99.94% shareholding.
The impact of a LPG price hike will reflect across the board with low and middle income groups having to bear the brunt of it as a range of food items, from the ordinary man’s buth packet to flour-based products such as stringhoppers, roti, pittu and hoppers going up in price.
As even wayside eateries now depend on cooking gas, a price revision of food items will be inevitable, industry players said.
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Fuel crunch looms
Govt. tells fuel distributors to maintain stocks to ensure uninterrupted supplies
by Saman Indrajith and Norman Palihawadane
The government had instructed private fuel distributors to maintain minimum stocks and ensure uninterrupted supplies to the market, Energy Minister Anura Karunathilaka told Parliament yesterday (06).
Karunathilaka said the Ministry of Energy Secretary had notified the relevant companies of the requirement, following a reduction in supplies by some private distributors, amid higher international fuel prices.
The Minister said private companies had informed the government that they were facing losses because international prices had risen while fuel was being sold, locally, at prevailing prices. As a result, some companies had reduced the volumes released to the market.
The reduced supplies had increased the burden on the Ceylon Petroleum Corporation (CPC), whose share of the diesel market had risen from about 54% to 82%, the Minister said.
“The CPC currently holds an 82% share of the market,” he said, adding that it had increased its supplies, compared with February, to compensate for the reduction by private distributors.
Karunathilaka said the government could not, under the existing agreements with private companies, specify the quantities they should supply to individual filling stations. However, it could require them to maintain minimum stocks in the country.
The Minister said the Energy Ministry had already instructed companies that had failed to maintain the required stocks to take steps to prevent supply disruptions.
The Minister attributed the queues reported at some filling stations to reduced supplies from private distributors, as well as normal variations in fuel distribution. He also said demand for CPC fuel had increased because private companies generally did not provide fuel to dealers on credit, while the CPC offered a three-day credit facility.
“We expect that, as the Ceylon Petroleum Corporation takes on this additional burden, the problem will ease to some extent by Wednesday or Thursday,” Karunathilaka said.
He said instructions had also been issued to increase supplies to CPC filling stations. A special discussion on the issue is scheduled for today (07), with officials of the Energy Ministry and CPC expected to participate,
along with President Anura Kumara Dissanayake.
Meanwhile, Petroleum Dealers’ Association officials have called for an early solution to the supply issue. Association Chairman D.V. Shantha Silva said queues had been reported at many filling stations, mainly those operated by private distributors.
He said the situation was not due to an overall shortage of fuel, but was linked to reduced orders by Lanka IOC, Sinopec and R.M. Parks amid concerns over losses incurred on fuel sales.
The Ceylon Petroleum Private Tanker Owners Association has urged motorists to refrain from panic buying, saying there was no nationwide disruption to fuel supplies.
The government earlier increased fuel prices and introduced a per-litre diesel subsidy following concerns raised by distributors over rising international prices.
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