Financial Times

Gas: Rare victory for consumer

Last week's Appeal Court ruling against Shell that allows Mundogas to refill empty liquid petroleum gas cylinders of other LPG suppliers will certainly benefit consumers by giving them greater choice and helping to break the stranglehold of the multinational that has long maintained a monopoly of the local market. The ruling has also exposed the predatory pricing mechanisms of multinationals. Consumers, who for years have had to put up with regular and hefty increases in the price of gas, will now be able to take their empty cylinders to be refilled by the company that offers them the cheapest gas.

Mundogas and its controversial chairman, shipping tycoon Ariyaseela Wickremanayake, deserves to be congratulated for taking on a multinational and emerging victorious. It remains to be seen how long consumers will have this choice since Shell is likely to challenge the ruling, most likely on the grounds of its trade mark being infringed.

The petitioner Shell Gas Lanka had asked court to quash the gazette notice issued by the Minister of Consumer Affairs empowering Mundogas to accept and refill empty cylinders bearing the Shell trademark.

The Court of Appeal has vacated the interim order that restrained Mundogas Lanka from refilling any empty liquid petroleum gas cylinder bearing any trademark.

The court said Shell Gas Lanka had failed to disclose to court relevant findings of an inquiry by the Fair Trading Commission about the pricing of gas cylinders and refunds. It said Shell had failed to inform court, before the interim order, of vital information - that the full value of an empty 12.5 kg LPG cylinder is recovered when it is sold to customers. The court said this amounted to suppression of material facts.

According to figures supplied by Shell, the landed cost of a 12.5 kg cylinder had been Rs. 1,682 in 2001 but the company charged customers Rs. 2,150. The court said the multinational had suppressed the fact that it recovers the full value of a cylinder when selling it

Court also held that empty cylinders bought by customers are their property and no restrictions could be imposed on them to return such cylinders to the company that sold them. Shell had argued this was unlawful as it allowed others to fill cylinders bearing its trademark.

Predictably, Shell has expressed disappointment over the ruling.

Its country chairman Roberto Moran has been reported as saying that this was the first time that any country had allowed cross filling of LPG cylinders. So what? Just because something has not been done before there is no reason it cannot be tried.

However, Moran has not uttered a word on the court's comment that his company had suppressed material facts in this case. The multinational has always claimed to have incurred losses but has been wary of revealing figures about how much money it is making in this country.

As is well known, there are various ways of siphoning off profits. Shell also has a large storage terminal in Muthurajawala built as part of its investment in the island.

It is not clear how the Appeal Court ruling affects the injunction issued by the Supreme Court, in a case filed by LAUGFS Gas, preventing other parties refilling that company's cylinders. More confusion?

But the ruling also raises another, vital issue - that of safety. Who will now be responsible if a gas cylinder explodes? Shell is already denying responsibility. Moran also claimed that Shell would no longer guarantee the safety of cylinders filled by other companies.

That may be a correct position to take but it shows that there is a need for a law to be brought in to say that the company which last filled the cylinder is liable. Otherwise consumers will be left exposed and not be able to hold anyone responsible if they suffer any hurt as a result of a defective gas cylinder.