Financial Times

Need for LPG regulator stressed

Gas is much cleaner and more efficient than firewood - Ranasoma (Shell)
Unethical and unacceptable practices must be removed - Wegapitiya (Laugfs)
This is not my line of business. I don't intend to stay in it for too long - Wickramanayake (Mundo)

Friends or foes?

From left - Dr. Mahesha Ranasoma, Director of Corporate Affairs Shell Sri Lanka, W.K.H Wegapitiya, chairman of Laugfs Gas and Ariyaseela Wickramanayake, chairman of Mundo share a light-hearted moment during a panel discussion on the gas industry organised by The Sunday Times Business Club. Pic by M.A. Pushpakumara.

By Ruwanthi de Silva
The three main players in Sri Lanka's LPG industry came together on a common platform last week and stressed the need for proper regulation of the business. While disagreeing on many issues relating to safety and pricing, Shell Sri Lanka, Laugfs Gas and Mundo Gas at a rare panel discussion organised by The Sunday Times Business Club on Thursday however agreed that regulation of the industry by the state was necessary to ensure standards.

The discussion on "LPG and benefits to the consumer" saw interesting counter-points expressed by Dr. Mahesha Ranasoma, Director of Corporate Affairs Shell Sri Lanka, W.K.H Wegapitiya, chairman of Laugfs Gas and Ariyaseela Wickramanayake, chairman of Mundo Gas particularly on cross-filling of cylinders, safety issues and pricing. Shell and Laugfs were unconvinced that consumers should have common cylinders, a move promoted by Mundo.

Apart from a radio programme about a year ago when the three were involved in a panel discussion on gas, this is the only occasion when the three LPG players have come together to discuss a controversial public issue which in recent times has been triggered by long delays in Mundos' entry into the market, safety standards and the use of a common cylinder. The panel discussion came a week after the BOI approved proposals by two Malaysian companies to enter the LPG distribution market in Sri Lanka, fuelling more competition.

In their presentations the panelists focused on the benefits of using LPG as opposed to other fuels, mainly fire wood, which is widely used in Sri Lanka. Ranasoma and Wegapitiya said even though firewood is cheap and widely available LPG is safer, cleaner has greater controllability, and is more efficient.

Wegapitiya said, "In Asia death rates related to burning of Bio Mass is much higher than those related to HIV." While agreeing that LPG was absolutely safe, Wickramanayake said however that he was not a promoter of gas for mass consumption.

"There is a need to produce the gas locally if the country is to benefit. At the moment Rs. 6 billion is being spent on importing gas. I am not in favour of consumers switching to gas from fire wood which has been used for years as a fuel wood." LPG is being used by around 20 percent of Sri Lanka's 20 million people. Speaking on their entry to the market Wegapitiya said "When the Shell monopoly ended we had an abnormal contract with the government, which said we could use 10% of gas from our refinery if we set up in 60 days, and gas would be sold to us by the government at Rs 15,000 per metric ton.

Two months after entering the industry the government changed, and the price of a metric ton rose to Rs 20 000. For the first time in August 2002 the government imposed VAT on gas, allowed Shell to increase prices while asking Laugfs to reduce prices." He called for unethical and unacceptable practices to be removed and for certain norms and best practices to be adopted. When asked if Mundo gas could maintain the price gap, Wickramanayake said, "

Our overheads are low, and we believe we can maintain this gap, as for me this is not my line of business and I don't intent to stay in it." Mundo's prices are lower than Shell and Laugfs. On the purchase of cylinders, Wickramanayake said, "the government will soon make it law that the cylinder is common and could be filled by any contender of the market, leaving the last person who filled the cylinder liable for its safety."

Reacting to this, Wegapitiya said, " For customers this would be an easy and attractive proposition, but as a responsible corporate body we cannot accept this as it raises safety concerns. This has not happened anywhere in the world, and would be a serious infringement of intellectual property rights." He disagreed with Wickramanayake on the need for a common cylinder, saying cross filling would lead to unbranded marketing.

"De-canting and cross fillings can be very dangerous and could result in coal burns. We deliver a value added services and we want to practice brand marketing. At present Sri Lanka is not geared to take in the concept of a common cylinder," noted Ranasoma from Shell as the cross-filling issue drew panelists and Business Club members into a heated debate. Both Ranasoma and Wegapitiya said they have thorough service check ups on their cylinders and issue safety booklets. The event was sponsored by the Trans Asia Hotel and co-sponsored by Lion Brewery Ceylon Ltd, makers of Carlsberg.

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