CAA and Litro lock horns over 18-litre cylinder

Tuesday, 4 May 2021 00:38 -     - {{hitsCtrl.values.hits}}

  • Litro misleading regulator, Govt. and public, charges CAA
  • Litro denies all allegations; Chairman says innovating in line with global developments
  • 1977 hotline gets 350 calls by 3 May saying 12.5 kg cylinders unavailable
  • Litro says new cylinder composition beneficial; CAA rejects claim
  • Gas quantity reduced in new cylinder from 12.5 kg to 9.7 kg
  • CAA yet to file legal action if Litro in violation of CAA Act, issues letter to Litro

By Marianne David

The Consumer Affairs Authority (CAA) and Litro Gas Lanka yesterday locked horns over the new hybrid 18-litre cylinder, with the former insisting the product was in violation of multiple regulations and was misleading the public, while a company official contended they were within legal parameters. 

Litro Gas recently introduced a new 18-litre hybrid premium gas cylinder, priced at Rs. 100 less, claiming it was more efficient than the 12.5 kg cylinder. But the CAA insists the company does not possess sufficient evidence to prove its assertions.

“It is a scam – they are issuing a cylinder with reduced weight and trying to claim its new composition is advantageous. This shows scant regard for the regulator in the country. It shows no regard for the law and you are mocking the intelligence of the CAA and the citizens of the country,” charged CAA Executive Director Thushan Gunawardena.

However, Litro Gas Chairman Anil Koswatte denied the allegations, stating that company had every right to introduce a new product. “This is an organisation decision, in line with the legislation of the country. We are not doing anything that violates existing rules and regulations. Every company as a corporate entity can introduce anything within these parameters.”

Last week Consumer Protection State Minister Lasantha Alagiyawanna told the media that Litro Gas could reintroduce its 18-litre hybrid premium gas cylinders to the market after properly informing the consumer and meeting three conditions – inform the consumer on the efficiency of the new product; the cylinder should specify the quantity of gas and its price; the cylinder needs to be in a different colour to be identified easily from the rest.

Gunawardena however asserted this was still unacceptable since it did not ensure consumer protection and would still be in violation of the CAA Act, unless it was introduced as a new product that could be differentiated from the rest and price determination was carried out by CAA and agreed upon prior to deployment in the market.

Commenting on CAA’s position that the new pack should be differentiated, Koswatte said that was in line with the section on preventing consumer confusion in terms of labelling.

“That concern is relevant only to pricing. They say we have changed the existing can to the 18-litre can. The can is a material you use to carry the product and is in fact worth more than the product. If we are forcing consumers to buy this product, they can intervene, but they are talking about something else. They have to understand the world market prices and the request to the CAA.”

Koswatte said Litro Gas signed an agreement with the CAA in 2019, in line with which a formula was declared for the 12.5 kg cylinder for Maximum Retail Price.

“The 12.5 kg product is what we have to get approval for to increase prices. We have been writing to the CAA repeatedly requesting a price hike since 2010. We requested Rs. 2,100 and they have approved Rs. 2,040 according to world prices and foreign currency appreciation. However, our new pack has nothing to do with the old pack which we have declared to the authority.”

Commenting on the requested price hike, Gunawardena said: “They are asking for a Rs. 750 increase. How fair is this when they have not shown a shred of evidence that they have taken austerity measures within the company? They have to first internally control their costs. Then they can come to us saying ‘we have taken these measures’ and then ask for price hike, but not at the expense of the consumer.”

Furthermore, defacing a label or altering a description requires CAA to file legal action as it is in violation of Section 10.4 and Section 31 of the CAA Act.

“They cannot make false claims of the product being new. They wrote to CAA saying this is a brand new product, which would be provided in addition to existing stock. This is misleading the regulator. Litro is also claiming it has adequate stocks, however CAA has received 350 calls to the 1977 hotline as of today (3 May) saying 12.5 kg cylinders are not available,” said Gunawardena.

However, Koswatte emphasised that the company was acting entirely within its rights and in line with the CAA Act.

“In 2003 gas was gazetted under the CAA as an essential commodity items for consumers and they gazetted a pricing formula, in line with the CAA Act section 18.1. 18.2 says, ‘No manufacturer or trader shall increase the retail or wholesale price of any goods or any service specified under subsection (1), except with the prior written approval of the Authority’. 18.3 says, ‘A manufacturer or trader who seeks to obtain the approval of the Authority under subsection (2), shall make an application in that behalf to the Authority, and the Authority shall, after holding such inquiry as it may consider appropriate: (a) approve such increase where it is satisfied that the increase is reasonable; or (b) approve any other increase as the Authority may consider reasonable, and inform the manufacturer or trader of its decision within 30 days of the receipt of such application.’ 

“18.4 clearly says, ‘Where the Authority fails to give a decision within 30 days of the receipt of an application as required under subsection (3), the manufacturer or trader who made the application shall be entitled to, notwithstanding the provisions of subsection (1), increase the price’. Therefore if they don’t give a decision within 30 days of the receipt of an application, the manufacturer has all the right to increase the price even without being eligible to increase.”

While the composition of a gas cylinder is generally 70% butane and 30% propane, the new cylinder comprises 50% butane and 50% propane. However, CAA said consultations with the CPC and University of Moratuwa had found that this new composition provided no benefits, while the gas quantity had been significantly reduced in the high capacity cylinder.

Commenting on the composition of the product, Koswatte asserted: “The company is innovating in line with global developments in the LPG sector. In countries like the UK and Japan, 100% propane is provided. When you increase propane as much as possible, you can cook more in a shorter time. The 18-litre can equals 9.7 kg as opposed to 12.5 kg, but we are using the same can because more space is needed for evaporation with propane.”

Gunawardena however questioned claims about the new pack, stating: “They are talking of high capacity high energy. Who is backing those claims? This violates Section 31 of the Act. They are writing to us saying ‘new pack, new stock and high capacity’ and falsely representing that goods are new – that is a direct violation. Representing that goods have uses of benefits they do not have – this is also a violation. There is no expertise to back up these claims. It is misleading the entire nation. The Chairman is making statements plucked from thin air, misleading the regulator, the Government, and the general public.”

Meanwhile, Koswatte said the purpose of introducing the new cylinder was in line the company’s vision to ensure every household would have a gas line by 2030. “The company is moving forward with technology and people will accept it, we have confidence in that. We will do this by converting the existing cylinders instead of doing new cylinders. We can decide on the package based on consumption.”

Litro Gas is currently in the process of developing the pipeline gas system and launched a test project in five houses yesterday (3 May).

Asserting that keeping a gas cylinder inside a kitchen or home is dangerous, Koswatte said: “We have to take gas cylinders out of kitchens. Yesterday we started implementing this new system; the current system is too primitive, where people are even transporting gas cylinders in carts; we have to develop. With the new system, our people will handle the cylinders, no one has to carry them about. We implement two locks similar to circuit breakers and the cylinder is placed near the water metre or in the garage. Litro will provide a complete service.

“With this new service, via which we are going to the next level, gas is measured in litres. CAA is pushing its formula, hence the insistence on kg instead of litres. Sri Lanka has to move forward; Port City is 100% pipeline gas, Hilton, Galle Face, Altair, are all pipeline gas.”

Meanwhile, Koswatte in a recent TV interview stated the company was working with LAUGFS Gas to position the 18-litre cylinder, which Gunawardena said was a clear violation of the act.

In Section 8 of the Consumer Affairs Authority Act No. 9 of 2003, reference is made to restrictive agreements, arrangements, and dominant position among enterprises. Litro and LAUGFS Gas are the only suppliers of LPG and hold a dominant position in the market.

As things stand, Litro has been reprimanded by CAA for the introduction of the new cylinder and a letter has been sent to the company. 

“The CAA is here to regulate and to implement the rules. There is an Act to guide us and we have to take action when it is violated. When small entities break the rules, they are left with no choice but to defend themselves in Court. Litro being influential and a Government institution thinks it can violate laws and go forward,” said Gunawardena.

In this backdrop, questions are being raised over the CAA’s reluctance to take legal action against Litro if it has in fact violated the Act as claimed, which sets a bad precedence in terms of prompt legal action being taken in relation to some violators and the law being selectively applied to others.

Gunawardena stated: “When the President came to power, his policy document clearly stated there should be no political interference with Government agencies and this has worked to a greater extent. We sent a letter telling Litro to stop and withdraw. This is the system change the President was looking for, but I agree there needs to be improvement since it has not been fully instituted.”