LPG prices jacked up as Litro Chief says move unavoidable

• State-owned utility has suffered Rs. 22 b in past year; debt soars to Rs. 10 b
• Hike will help eliminate daily loss of Rs. 250 m though Litro will still incur a loss of Rs. 900 per 12.5 kg cylinder despite the latest increase

By Darshana Abayasingha

Litro yesterday increased its prices of LPG with its Chairman Vijitha Herath saying the move was unavoidable.

Price of a 5 kg cylinder of Litro domestic LP gas was increased to Rs. 1,945 (up by Rs. 874), a 2.3 kg cylinder to

Chairman Vijitha Herath

Rs. 910 (up by Rs. 404) and 12.5 kg to Rs. 4,860 (up by Rs. 2,185).

Prior to announcing the hike, Herath told journalists at a briefing that its operations cannot resume without a price hike, as Litro Gas incurred a loss of Rs. 22 billion over the past year.

Despite the price hike, Litro will still incur a loss of Rs. 900 per 12.5 kg cylinder, as the landed cost of a cylinder is Rs. 4,600 at prevailing rates. With distribution and handling costs added the effective cost of a 12.5 kg cylinder should be Rs. 5,500, he said.

The Chairman noted that during discussions with Treasury and international lending agencies, the Government had pledged to release funds for gas imports, as the total annual bill was not more than $ 500 million. 

However, a price hike is inevitable, he said, as the company cannot operate in a situation of mounting debt, with no banks willing to lend to the institution. Herath added that Litro gas had over Rs. 12 billion in reserves in March 2021 and the Company now sits on debt to the tune of Rs. 10 billion.

“We cannot resume operations without a price increase, and the Government should take steps to introduce an effective and transparent price formula to regularise the supply of gas based on global prices. 

“There is no point in trying to paint a rosy picture because we are in immense difficulty due to this problem over price. Many other critical state institutions like the CEB and the Petroleum Corporation are also facing a debt crisis as we have not established an effective pricing mechanism. Political will must be there to address these issues, if not we cannot move ahead irrespective of who is at the helm,” Herath said. 

He pointed out that over 1.5 million households in Sri Lanka use LP Gas for cooking, but even households that instead use firewood are forced to bear the costs of mismanagement. 

Currently, one ton of LP Gas is sold at around $ 950 in the world market, and Litro Gas incurs a further $ 105 in handling costs to its terminal before bottling and distribution. Currently, there is demand for over 100,000 cylinders daily and at previous prices Litro Gas would incur a daily loss of Rs. 250 million, he said.  

“Therefore, we are unable to sell gas unless it is at the correct price, there is no other alternative. This has been building over a period of time, and the situation is unavoidable. The longer it takes, the harder it becomes to service the requirement,” Herath added, stressing the need to consider other sources of renewable energy.  

He noted industrial cylinders are still available, but domestic cylinders are in short supply and it is not easy to regularise supply.

Litro Chairman also stated that compensation would be paid to all persons and families affected by exploding gas cylinders over the past few months and that he is currently reviewing all operational aspects of the company.