Trade union warns Litro in crisis, alleges sabotage

• State-owned entity suffers Rs. 2.2 b monthly loss due to Govt. failure to allow price hike in LPG
• Raises questions over Govt. deal with LAUGFS and recently formed LPG buying firm Siyolit Ltd.

State-owned LPG provider Litro is in crisis due to sabotage, a trade union formed to save it has warned. 

Litro Surakime Jathika Ekamuthuwa (LSJE) or Litro Surakeeme National Unity, a collective of employees and members of civil society seeking to preserve the organisation, said in a statement that Litro Gas, commanding an 80% market share, was currently incurring a loss of Rs. 847 per cylinder – amounting to Rs. 80 million a day, or Rs. 2.2 billion per month. 

It said the current predicament was despite Litro being one of the few enterprises to have stayed afloat in the midst of the pandemic without burdening the Treasury or other public institutions such as the Sri Lanka Insurance Corporation. 

The statement also said Litro’s bunkering facility handles approximately 35,000 MT of LPG monthly and provides direct employment to over 225 personnel. The organisation 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 and August 2021, Litro has suffered approximately Rs. 8.5 billion in losses. 

“Litro’s current crisis is two-fold: 1) Litro incurred further losses due to the 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 a parliamentary subcommittee. Experts cite both scenarios as being injurious to the 150-year-old public enterprise,” the statement alleged.

Under recommendation 1 of a parliamentary subcommittee report dated 27 June 2021, the price of a 12.5 kg domestic LPG cylinder was fixed at Rs. 1,493. However, on 13 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 an 80% market share, the SOE currently absorbs a loss of Rs. 847 per cylinder amounting to Rs. 80 million a day and Rs. 2.2 billion per month. 

It said interested parties had called to question the intentions and integrity of the recently formed LPG buying firm Siyolit Ltd., headed by Susantha de Silva as CEO/Chairman. It has been observed that the Directorate of this firm is lopsided, with two Directors being allocated to LAUGFS, which has a 20% market share, while Litro, with over an 80% market share, only being allocated three Directors. 

Further, Siyolit 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 favouring the demand from the Western Province, which amounts to 60% 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 underutilisation., stated the trade union. 

The trade union also expressed concern over the prevailing circumstances which, if not addressed promptly, they said may lead to dire repercussions. Some concerns include the overburdening of LAUGFS’ infrastructure resulting in breakdowns and shortages of national LPG supply, and Litro losing market share and ultimately LAUGFS achieving a state of monopoly which may disadvantage citizens of Sri Lanka. 

The statement noted that, as per Cabinet recommendations, a committee has been appointed to look into restructuring of the LPG industry for a trial period of six months, but that many recommendations slated to be implemented by the committee 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 LAUGFS to thrive and Litro to inevitably shrink due to neglect and/or overt interference,” the statement warned. 

It also alleged that the real motivation behind seeking to make the cash rich Litro dependent on a much smaller and bankrupt competitor, appeared to be an elaborate scheme to allow the latter to enjoy a monopoly.