LP gas pricing formula to Cabinet soon

Monday, 1 October 2018 01:36 -     - {{hitsCtrl.values.hits}}

  • Says new pricing formula might have to seek Supreme Court approval, too
  • Points implementation of pricing formula is only way to address issues in value chain
  • Stakeholders of the two LP gas distribution companies grapple with increasing costs

By Charumini de Silva

The long overdue LP gas pricing formula will soon be submitted for Cabinet approval, a top official confirmed yesterday.

“The pricing formula was revisited by the Authority’s Pricing Committee after the industry requested to change the prevailing pricing formula which was introduced in 2007. The amended pricing formula has now reached the final stages, and the Industry and Commerce Minister (Rishad Bathiudeen) is ready to submit it to the Cabinet for approval in the near future,” a top official of the Consumer Affairs Authority (CAA) told Daily FT on condition of anonymity.

Noting the original pricing formula had to obtain Supreme Court approval, he believes that the new mechanism might also have to go through the same process.

“The swift implementation of the LP gas pricing formula is the only way to resolve the issues looming in the industry,” he added.

The two companies involved in the distribution of LP gas in the country, State-run Litro Gas Lanka Ltd. and Laugfs Gas PLC, have continuously lobbied to Government to implement the pricing formula, which has been overlooked by authorities for many years.

Currently, both these companies as well as its stakeholders in the value chain are grappling with many difficulties from skyrocketing costs on a daily basis.

As the sole regulatory body, the CAA introduced a pricing formula in 2007, allowing then Shell Gas Lanka Ltd. (now Litro Gas Lanka Ltd.) a lesser margin (18% on landed cost) and a higher margin to Laugfs Gas (30% of landed cost). 

Despite the various representations made by the two companies over the years, a lasting solution to the issue is not yet within reach.