Rs. 1.5bn loss per month

By Suresh Perera

An increase in the price of Liquid Petroleum Gas (LPG) is now on the cards to offset a staggering loss of Rs. 1.5 billion per month incurred by Litro Gas Lanka in the backdrop of a spike in global pricing, which a senior industry official described as a “crippling blow”.

“We have to incur a loss of Rs. 700 on every domestic LPG cylinder sold in the market”, says Janaka Pathirathna, the company’s Director, Sales & Marketing/Corporate Affairs.

He said that the approval of the Consumer Affairs Authority (CAA) has already been sought to push up LPG prices, but there was still no formal decision on the matter.

Asked about the quantum of the price increase sought by Litro Gas, he replied, “Though we have indicated that a Rs. 700 loss is being incurred per domestic cylinder, it’s left to the government to determine the new pricing structure”.

Losses are steadily mounting as domestic cylinders account for the lion’s share of 80% of the total market, Pathirathna stressed.

“The more we sell, the more the financial losses we have to grapple with”, he complained.

Asked about industrial LPG cylinders, he replied, “We sell them at the procured price without a mark-up”.

He said that Litro Gas Lanka maintained stable prices for more than a year despite escalating global prices.

International LPG prices have now ballooned to US$ 600 per metric ton, he noted.

With the Covid-19 pandemic impacting markets across the world, coupled with currency fluctuations, international prices of LPG as one of the world’s most widely used energy sources have seen volatility.

According to Argus Independent Commodity Price Reporting Agency, the leading independent provider of energy and commodity price benchmarks, rising prices and uncertain economic forecasts overshadow the LPG industry globally.

The Argus pricing benchmark ‘Argus Far East Index’ is used widely in Asia, while Saudi Aramco Index is also used in countries such as Sri Lanka.

LPG is more than a commodity in Sri Lanka – it is an economic indicator that keeps home fires burning and multiple industries running, says Anil Koswatta, Chairman of Litro Gas Lanka,

“We understand the importance of passing on the economic benefit to the end-user as outlined in the government’s vision for the nation. As a result, despite currency fluctuations and LPG prices moving up worldwide, we have consistently maintained our prices in accordance with this vision”, he emphasized.

While it is difficult to predict the pricing structure due to external factors, global indicators such as fluctuating world LPG prices, currency fluidity and industry demand may result in price variations, Pathirathna said.

On the way forward for LPG markets amidst the pandemic, Argus Report says that growth is expected in 2021 resulting in spiraling prices possibly continuing until the end of the year. While seasonality will also drive demand, Argus Report also acknowledges that petroleum price reversals are likely to result in uncertainty of global LPG prices.

Industry experts affirm that while in the developing world, LPG is primarily used for domestic cooking, in the developed world, it is used widely for indoor heating.

“As the national LPG provider, Litro Gas Lanka understands the importance of stabilized pricing. However, rising international prices and enhanced international shipping and freight rates could further burden us”, Pathirathna added.