Sri Lanka in dilemma over LPG prices
Despite the sharp drop in the global LPG price, Sri Lankan consumers being forced to stay home amid COVID-19 are still to receive its benefit with no sign of a price reduction.
However the two national LP Gas providers say that their import and other costs are high along with the depreciation of rupee and they are running at a loss by selling LPG at the current price ceiling.
With around 42 per cent of the population using LPG for domestic cooking, state authorities should intervene to bring down the prices for the benefit of around 8.8 million Sri Lankans, consumer rights groups complained.
Power and Energy Minister Mahinda Amaraweera has the power to revise the maximum retail price of LPG cylinder if he is of the opinion that it is ‘essential to the life to the community’ in accordance with the Consumer Affairs Authority (CAA) Act.
Although the Authority has the power to regulate prices of essential commodities on the directions of the subject Minister, no action has been taken so far to revise the retail price of LPG cylinders considering the rapid drop in international prices.
CAA Chairman Major General (Retired) D.M.S. Dissanayaka told the Business Times that he will bring the LPG gas price matter before the pricing and management division to examine the cost structure pertaining to a price revision.
The market for distribution of LPG is a duopoly in the hands of two key firms Litro Gas Lanka Ltd. (LGLL), a state-owned entity, and LAUGFS Gas PLC (LGP).
According to an official announcement, the current controlled price was fixed in October 2019 at Rs 1493.90. From there onwards oil and LPG gas prices in the world market have come down significantly and state authorities are still to intervene into this matter for the benefit of consumers.
Many countries including neighbouring India have cut prices of LPG cylinders proportionate to the rapid drop in international market prices with hardly any reflection on the LPG market price in Sri Lanka.
Chairman of Litro Gas Lanka Ltd. (LGLL) Anil Koswatte told the Business Times there is no way to bring down the prices as there was an agreement with the CAA to maintain the current prices for at least six months since late last year.
He noted that Litro Gas has been able to supply without any shortage during the COVID -19 difficult period.
The company has incurred a loss of Rs.39.30 for a domestic gas cylinder in December 2019, Rs.360.35 in January 2020, Rs.250.98 in February 2020 and a loss of Rs.206.38 in March 2020, he said adding Litro had to bear a financial loss amounting to Rs. 800 million and yet managed to pay the government taxes.
Even during the curfew period Litro Gas implemented a house-to-house delivery service without levying transport charges, he revealed.
He noted that the company is now purchasing LPG at Saudi Aramco price of US$490 per tonne and it has fluctuated from $230 to$430 during the last few months.
The Saudi Aramco Contract Price is considered the primary international benchmark for LPG price regulations within the Arabian Gulf and Asian region, and a significant volatility in this contract price was seen directly impacting the LPG retail prices in Sri Lanka.
Chairman of Laugfs Gas PLC W.K.H. Wegapitiya said that his company is losing Rs.200 per LPG cylinder by selling at the current price ceiling as its import cost is accommodative to exchange rate fluctuations FOB price of imports, and changes in cost, insurance and freight.
On top of it the company has to bear additional costs for transportation, local purchases, applicable taxes and terminal charges, and manufacturer costs, he added.