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Laugfs will thrive and Litro will shrink due to ‘re-structuring’ fears LSJE
View(s):The Litro Surakime Jathika Ekamuthuwa (LSJE) has sounded alarm over what it claims are attempts to sabotage Litro Gas in favour of its sole competitor Laugfs.
Issuing a statement the LSJE, which comprises a collective of employees and members of civil society, notes that 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.
Litro’s current crisis is two-fold, the union claims. One issue is that Litro incurs further losses due to the price of a cylinder not being determined by market forces. The other problem is that as per the recommendation of a Parliamentary Sub-Committee, Litro’s control is to be handed over to Laugfs Holdings PLC.
Under the recommendation of the Parliamentary Sub-Committee report dated June 27, 2021, the price of a 12.5kg domestic LPG cylinder was fixed at Rs.1493. However, on August 13 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, it currently absorbs a loss of Rs.847 per cylinder amounting to Rs.80 million a day and Rs.2.2 billion per month, the LSJE further notes.
They also point out that questions have been raised regarding the intentions and integrity of the recently formed LPG buying firm Siyolit (Pvt) Ltd. 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 state-of-the-art 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.”
The LSJE expresses concern over prevailing circumstances which, if not addressed promptly, may lead to dire repercussions. Some concerns include overburdening of Laugfs’ infrastructure resulting in breakdowns and shortages of the national LPG supply, Litro losing market share and ultimately Laugfs achieving a state of monopoly which may disadvantage citizens of Sri Lanka. 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, the statement claims. “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 ‘re-structuring’ would cause for Laugfs to thrive and Litro to inevitably shrink due to neglect and/or overt interference,” it further adds.