Litro distributors warns of LP gas supply crisis

LP Gas Distributors Association of Sri Lanka President Sathyendra Wijayapura addressing media briefing – Pic by Sameera Wijesinghe

Calls for 12% increase in channel margin,  Rs. 7 per km transport margin adjustment

• Warns of ramifications on domestic and industrial front, triggering economic downturn
• Despite Litro strictly providing gas on immediate payment, gas distributors are on varied 
• payment terms amounting to Rs. 650m
• LPGDASL says no intention to make CAA, Litro Gas, general public inconvenienced by a sudden shortage of LP gas caused by inability of two organisations
• Claims meetings with Malik, Rishad, CAA have been unsuccessful

By Charumini de Silva

With the Government continuing to give the cold shoulder to State-run Litro Gas distributors, the LP Gas Distributors Association of Sri Lanka (LPGDASL) yesterday cautioned of a looming crisis in liquid petroleum (LP) gas supply, as they would be reluctantly compelled to downsize the deliveries if the issue is not addressed immediately.

LPGDASL charged authorities with not paying attention to their longstanding plea to increase Channel Margin to 12% (7.5% to distributors and 4.5% to dealers), which has not been reviewed since 2007, and the Transport Margin to be amended to a minimum of Rs. 7 per kilometre within the Colombo district, with a sufficient increase in percentage for all other districts.

“If the Government fails to reflect on this matter, it will lead to huge ramifications on the domestic and industrial front, and would trigger an economic downturn in the country, which is something we have always tried to avoid — but which would unfortunately happen unless the relevant authorities take immediate remedial action,” LPGDASL President Sathyendra Wijayapura told journalists in Colombo yesterday.

According to Wijayapura, the key issue they face is the significant increase in transport and related overheads, due to the increase in the price of diesel to Rs. 123, the increase in the cost of vehicle spare parts ranging from tyres to oils, and the high cost of human capital for a specialised job that requires regular training.

As the sole regulatory body, the Consumer Affairs Authority (CAA) introduced a pricing formula in 2007, but has not since reviewed the current distribution channel margin for distributor and dealer, while the district-wise transport margin has never been addressed similarly, except once in 2012 on a small scale.

Wijayapura said although there is a clause in this agreement on adjustments in the transport costs, to be reviewed annually except in the event of a price adjustment of diesel in excess of Rs.5, whereupon a proportionate adjustment would be made, the authorities have overlooked this term in the aforesaid pricing formula for years.

Wijayapura pointed out that distribution could stall in different parts of the country if the current crisis continues and their distribution costs continue to rise, affecting households, industries, tourist hotels, and crematoriums island-wide.

He listed out the growing financial commitments, which range from paying loan instalments, increasing staff salaries, lease instalments on vehicles, regular staff training, periodic marketing and promotions, vehicle insurance, maintenance and spare parts, as well as safety equipment for employees.

“We find it extremely impossible to continue our operations due to the extensive outflow of finances, and are struggling to retain trained staff, who now seek alternative employment in the absence of solutions to their grievances. With these latest round of financial burdens, it is unbearable, and it would mean that we would have to scale down our deliveries so that we can achieve a minimum profit to sustain our businesses,” he added.

Highlighting that Litro Gas issues the filled gas cylinders from their storage and filling plant to the distributors strictly on immediate payment terms, Wijayapura said the distributors ensure that these cylinders reach the dealers, and subsequently the consumers, in a safe and timely manner, while delivering directly to most commercial establishments on varied payment terms, which amounts to Rs. 650 million at present.

However, Wijayapura emphasised on the fact that they do not intend to inconvenience the CAA, Litro Gas or the general public by a sudden shortage of LP gas caused by the inability of two organisations to look into their legitimate grievances.

He said the communication and lobby to Litro Gas higher management, CAA Chairman Anura Meddegoda, CAA Director General D. Jeevanandan, Cabinet Sub Committee on Cost of Living Chairman Malik Samarawickrama, and Industry and Commerce Minister Rishad Bathiudeen has been unsuccessful.

At present, over 5.5 million households in Sri Lanka use LP gas as the main source of cooking energy, where Litro Gas enjoys over 73% of the market (over 4.25 million households) due to its state-of-the-art storage and filling plant in Kerawalapitiya operating through an extensive, well-equipped and highly-trained distribution channel, consisting of a wide variety of Small and Medium Entrepreneurs (SMEs) spread throughout the island.

The 35 distributors use a large fleet of 600 6-wheel, 10-wheel and prime mover trucks on a daily basis, through a dedicated channel consisting of around 8,000 dealers island-wide. In total, there are over 75,000 dependents in the LP Gas business as employees, stakeholders and service providers.

Noting that distributors also keep a large stock of empty cylinders to distribute, while maintaining at least three days’ stock in order to meet any delays that may occur at either at the filling plant or due to unavoidable circumstances such as poor maritime conditions, both of which may result in a possible out-of-stock situation in the country, he stressed that distributors have played a crucial role in setting standards on safe and efficient deliveries of LP Gas to both household and commercial enterprises without any major calamity for the last 22 years.