Financial Times

Gas: long wait for consumers
The privatisation of the Colombo Gas Company and the subsequent liberalisation of the liquid petroleum gas market were meant to benefit consumers by giving them a better product, that was available according to demand, safer, and above all, cheaper.

The acquisition of the gas company by the multinational, Shell, and subsequent entry of other players into the market has certainly improved availability and safety. But the price of gas has risen by leaps and bounds ever since privatisation, despite the increased competition. No doubt, the better product and service must come at a higher price. However, it is the inexorable and rather hefty increases in price that consumers find most annoying.

Even today, the Consumer Protection Authority (CPA) is reportedly studying a request from Shell Gas Lanka Limited to increase the price of a domestic gas cylinder. This while rival Mundo Gas is said to be wanting to reduce the price of its product.

Ariyaseela Wickramanayake, the combative chief of Mundo Gas, maintains that he can offer gas at a price lower than that of his competitors, given lower overheads. But the question is whether his lower overheads come at the cost of lower safety standards. It was reported last week that Wickramanayake's gas barge at Galle harbour had developed a leak and that the Sri Lanka Ports Authority had asked him to take necessary precautions to eliminate this hazard. While Wickramanayake should be congratulated for taking on a multinational and trying to give consumers a better deal, he cannot compromise on safety.

Consumers were told that when Laugfs Gas enters the market they would be assured of gas at a lower price. This proved to be correct only for a limited period and today the price of Laugfs gas is about the same as Shell's. It remains to be seen how long Mundo Gas will maintain a lower price, given the remark by its chairman, Ariyaseela Wickramanayake, that gas is not his line of business and that he may not remain in it for long.

Where does this leave his customers? Surely, Wickramanayake's comments are likely to be damaging to his own business prospects since those who buy his product will now not be certain for how long he will remain in business. Wickramanayake is no stranger to controversy and the dispute over the entry of his gas barge to Galle harbour and the safety and insurance guarantees demanded by the Sri Lanka Ports Authority are well known.

Last week's panel discussion among representatives of Shell Sri Lanka, Laugfs Gas and Mundo Gas, organized by The Sunday Times Business Club, focussed on the need for proper regulation of the industry by the state to ensure standards. The creation of a regulator to supervise the activities of market players is long overdue. This was one of the institutions that was promised at the time of privatisation.

The Consumer Protection Authority is playing the role of the regulator but the regulator for utilities, especially the ones that have been or are being privatised, is an urgent necessity if there is to be fair play and consumers are to be assured of a fair deal.

According to last week's panel discussion, cross-filling of cylinders is to be allowed by the government, despite the implications this would have for intellectual property rights concerns. If this is indeed going to be the case, then the need for a regulator is all-important.

The authorities have approved the entry of two more players, both Malaysian, in the LPG market, an indication that gas is indeed a lucrative business, despite the comparatively small size of our market. However, consumers are yet to reap the full benefits of privatisation and liberalisation.

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