Market to determine consumer gas prices

Shell Gas prices may increase more frequently following Shell Gas Lanka’s agreement with the Consumer Affairs Authority to review its prices every two months. This move came following a long discussion with the two parties concerning a pricing formula which was to be implemented to calculate Shell Gas selling prices according to world market prices.

Shell Gas prices were increased by Rs.125 within the year, before the Consumer Affairs Authority came to an agreement with Shell Gas Lanka Ltd (SGLL) on a pricing formula this week. The implementation of the formula yielded an increase on Shell Gas cylinders by Rs.213, which is the highest increase on gas cylinders since its operation began in Sri Lanka in 1995.

SGLL, Director Finance Rimoe Saldin told The Sunday Times that such the large increase was due to the Government’s tight fisted price control regime which did not allow SGLL to gradually increase its prices according to the increasing world market prices.“We have finally been able to agree upon a formula by which SGLL can stay in competition with the world market. If prices go down now we will be requested to reduce Shell Gas prices accordingly,” he said.

However, Mr. Saldin said world market prices had been not shown a downward trend during the past six months. This could spell further trouble for Shell Gas consumers as price revisions could be expected every two months while the present world market trend will mean that price increases will be more frequent.

The Government reduced Shell Gas price revisions within the past 20 months to just two revisions. As a result Shell Gas prices per cylinder have increased by 35% within the last eight months.Trade and Consumer Affairs Ministry Secretary Dr. R.M.K. Ratnayake said the new pricing formula would work to the benefit of the consumers in Sri Lanka as the price revisions would be frequent with only slight changes.

“It is also advantageous for consumers since Shell Gas will reduce prices if world market prices drop, though this has not been practiced before,” he said. Dr. Ratnayake said that the new price revisions will be according to the formula which adds the insurance, loading and storage costs to the export price. This would mean that price alterations would be made according to changes in the world market prices, loading and storage costs as well as the exchange rate of the rupee.