Gas fiasco continues: CAA against decision merge gas companies

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Even though authorities have expressed their willingness to propose the merger of Sri Lanka’s two liquefied petroleum gas (LPG) suppliers to establish an enterprise under a Public-Private Partnership (PPP) for importing and distribution, The Sunday Morning Business learns that the regulator, the Consumer Affairs Authority (CAA), is reluctant to approve or proceed with the said merger. The two suppliers, LAUGFS Gas and Litro Gas, came under scrutiny in the past few months for arbitrarily introducing new gas cylinders, which are alleged to be deceiving consumers and thus violating their rights. 

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Speaking to us, CAA Executive Director Thushan Gunawardena stated that this proposal by the Government of forming a PPP is a shortsighted decision that could severely impact the Sri Lankan economy in the future. 

Further, Gunawardena questioned the feasibility of this initiative, as Litro holds 75% of market share while LAUGFS has a mere 25%, thereby making it difficult to cater to their respective consumers.

“The committee appointed by the Government will not consider the purchasing aspect of gas cylinders. There is the possibility of maintaining profit margins without anyone knowing. Hence, it is a false, misleading statement by the Government,” Gunawardena highlighted. 

Meanwhile, LAUGFS Gas Chairman W.K.H. Wegapitiya vehemently denied the allegations about the merger, stating that the company would only work together with Litro Gas Lanka to procure gas.

“There is no such decision to merge both the companies operating in the country. We will work together if the Government wants us to procure the gas together,” Wegapitiya said. 

We also spoke to Litro Gas Lanka Director of Sales and Marketing/Corporate Affairs Janaka Pathirathna, who also made similar remarks, denying plans to merge the companies. 

“We are working independently right now. If the Government wants us to join with LAUGFS Gas to procure gas, then we would work with them; other than that, there is no such decision to merge both the companies,” Pathirathna confirmed.

Elaborating further, Gunawardena said that if the Government wants to conduct joint procurement, it should ideally form a new company in Dubai or anywhere else, in which they would have equal share and representation, through which the LPG should be purchased.

Recently, the Cabinet decided to proceed with a decision made on 7 June to appoint a Ministerial Subcommittee headed by the Minister of Trade to obtain recommendations on the restructuring of Sri Lanka’s LPG industry. 

Accordingly, one of the recommendations during this meeting was to allow both Litro Gas Lanka and LAUGFS Gas Company to purchase, transport, and store gas by using the Hambantota Gas Terminal, which has the capacity of 30,000 MT with manoeuvrability up to 65,000 MT.

Currently, both companies are requesting a price hike due to the current challenges faced by the prevailing Covid-19 pandemic. However, the CAA and the Government have stood firm on their decision to not increase the prices of gas. Accordingly, Prime Minister Mahinda Rajapaksa, who was also Minister of Finance at the time, on 17 March, said that there is no need to increase the local prices of gas, as there is no shortage in the country.

LAUGFS Gas PLC reported a net loss of Rs. 971.2 million for the company’s fiscal fourth quarter, in comparison to a Rs. 880.6 million loss reported in the corresponding period in 2020, while Litro Gas Lanka reports incurring a loss of Rs. 745 per cylinder sold to consumers. 

Meanwhile, State Minister of Co-operative Services, Marketing Development, and Consumer Protection Lasantha Alagiyawanna assured that the Government will absorb the burden, and will not revise gas prices, in order to protect consumers.

“The Cabinet has taken appropriate measures to facilitate both suppliers and consumers. Hence, gas prices will not be revised despite the surge in global price levels,” Alagiyawanna said, speaking to us.

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