Litro Gas is one of the country’s most profitable State-Owned Enterprises since November 2010 with an 80% share in the market for Liquid Petroleum Gas or LPG. Litro is one of the few enterprises that have stayed afloat in the midst of the pandemic without burdening the Treasury or other public institutions such as Sri Lanka Insurance Corporation.
Litro Surakime Jathika Ekamuthuwa (LSJE) or Litro Surakeeme National Unity, a collective of employees & members of civil society seeking to preserve the organization, holds that Litro is well poised to compete with any multinational counterpart especially with its state-of-the-art bunkering facility in Kerawalapitiya with a capacity of 8,000 MT which can singlehandedly cater to the total national demand due to the efficiency in terms of management & operations.
On a monthly basis, Litro’s bunkering facility handles approximately 35,000 MT of LPG and provides direct employment to over 225 personnel. The organization remains one of the greatest contributors to the local economy with an annual turnover exceeding Rs.50 billion. Litro also pays Rs.13 billion in dividends and Rs.34 billion in tax. However, by keeping the price of a domestic LPG cylinder at a minimum price between October 2019 & August 2021, Litro has suffered approximately Rs.8.5 billion in losses.
Litro’s current crisis is two-fold: 1) Litro to incur further losses due to price of a cylinder not being determined by market forces. 2) Litro’s control to be handed over to 20% stakeholder Laugfs Holdings as per the recommendation of Parliamentary subcommittee. Experts cite both scenarios as being injurious to the 150-year-old public enterprise.
Under recommendation 1 of parliamentary subcommittee report dated 27th of June 2021 price of a 12.5kg domestic LPG cylinder was fixed at Rs.1493. However, on 13th of August 2021 the Consumer Affairs Authority approved a price hike of Rs.363 for Laugfs cylinders only. Due to such provisions not being afforded to Litro Gas which is the largest player with 80% market share, the SOE currently absorbs a loss of Rs.847 per cylinder amounting to Rs.80mn a day and Rs.2.2bn per month.
Interested Parties have called to question the intentions & integrity of recently formed LPG buying firm Siyolit (Pvt) Ltd headed by Mr. Susantha de Silva as CEO/Chairman. It has been observed that the Directorate of this firm is lopsided with 2 Directors being allocated to Laugfs which has a 20% market share while Litro, with over 80% market share, only being allocated 3 Directors. Further, Siyolit (Pvt) Ltd insists on buying from Litro only via Laugfs’ bunkering facility which necessitates transporting LPG from Litro’s facility in Kerawalapitiya to Hambantota by sea. Litro is compelled to obtain the necessary infrastructure for this process from Laugfs at an additional cost. Litro’s state-of-the-art bunkering facility in Kerawalapitiya was built following comprehensive feasibility studies favoring the demand from the Western province which amounts to 60% out of total requirement. It is feared that these myopic proposals may render the Kerawalapitiya facility, which is a national asset, obsolete in the long run due to underutilization.
Litro Surakime Jathika Ekamuthuwa (LSJE) expresses concern over prevailing circumstances which, if not addressed promptly, may lead to dire repercussions. Some concerns include overburdening of Laugfs’ infrastructure resulting in breakdowns and shortages of national LPG supply, Litro losing market share and ultimately Laugfs achieving a state of monopoly which may disadvantage citizens of Sri Lanka.
As per Cabinet recommendations, a committee has been appointed to look into restructuring of the LPG industry for a trial period of six months. Many recommendations slated to be implemented by the committee, however, disproportionately disadvantage Litro. This may result in stifling investor confidence, raise issues regarding transparency and impact the per unit cost due to added overheads. It is feared that the outcome of this ‘re-structuring’ would cause for Laugfs to thrive and Litro to inevitably shrink due to neglect and/or overt interference.
Taking the above into account, interested parties seek a sustainable solution to the crises faced by Litro without infringing on its independence which has proved to have augured well for the organization prior to its downturn in 2019.
The real motivation behind seeking to make cash-rich Litro with 80% market share in LPG sector dependent on much smaller & bankrupt competitor with only 20% share – in what appears to be an elaborate scheme to allow the latter enjoy a monopoly – is worth confronting. Litro has the prowess, capacity & competence to not just recover itself but also to manage competitor’s infrastructure profitably bailing out the institutions which financed this endeavor thereby.