New gas firm faces mounting internal pressure against its survival
The newly-formed Special Purpose Vehicle (SPV) – Siyolit (Pvt.) Ltd is now facing pressure from workers of Litro (main stakeholder) against the involvement of Laugfs in operating a joint venture.
This SPV has been launched to take over liquefied Petroleum Gas (LPG) related functions including importing, storing, distributing and marketing in a collaboration between Litro and Laugfs companies.
This procedure will be carried out under a new operational model reducing costs by utilising Laugfs’ storage terminal facility at Hambantota.
But the employees of Litro Gas Company are vehemently protesting against this deal alleging that it amalgamates a state-owned public enterprise into Laugfs company business and ultimately handing this SPV over to Laugfs.
The preliminary arrangements to set up the new company had to be suspended as three nominees of the Litro Gas Lanka Ltd resigned although there was no decision to cancel Siyolit, Consumer Protection State Minister Lasantha Alagiyawanna said.
He noted that the Government’s aim in the establishment of Siyolit was to reduce the inefficiencies of both Litro Gas Lanka and Laugfs Gas companies.
But Litro Gas officials who attended a meeting at the Presidential Secretariat have informed Dr. P.B. Jayasundera that their company has the ability to procure LPG at low cost.
The newly established SPV cannot be dissolved with the resignation of three directors as the company can appoint new directors as replacements, a senior official of the Ministry Finance said.
According to the minutes of the first Board meeting, this company has been established to provide industry standard and quality assured gas with acceptable costs for the benefit of the two supplying companies.
Also, if this entity can build synergies between the two main competitors in the market, that will allow healthy and ethical competition in the future.
In the meantime, this company will help to eliminate some of the duplication of work and get into the economics of scale through a combined effort, the official said.
He further stated the financial arrangements for the company will be through equity capital and bank facilities.
He added that the proposed solution for utilising the Hambantota terminals could either be rented out or leased out. Alternatively, it could be brought in a joint partnership with an international firm.
An organisation to protect Litro called Litro Surakeeme National Unity formed by employees of the company has raised concerns about the proposed joint mechanism.
In order to strengthen Litro Gas Lanka as the state-owned national LPG supplier, the association has recommended several solutions to ensure the way forward for the LPG industry.
It has suggested to purchase the facility outright as a joint venture with an international industry leader or to lease their terminal for a 10 year period.
Members of the association even suggested and recommended taking over the entire LPG operation to ease Laugfs’ burden.
Litro Gas Lanka obtains LPG from the Government of Oman on a two year contract which stabilises prices.
Laugfs Gas Chairman W.K.H. Wegapitiya said he was not fully aware about the workings of the new company and was awaiting further development on this process.
Meanwhile the authorities are also examining the prospects of merging a new Ceylon Petroleum Corporation-subsidiary company for the production of gas, with Siyolit.