Laugfs Gas calls for full implementation of LPG pricing formula to avoid supply disruptions

„Says LPG prices need to be increased by further Rs.199 to reflect international market prices

Responding to concerns arising from possible disruptions to LP gas (LPG) distribution of State-run Litro Gas, Laugfs Gas affirmed that the full implementation of the LPG pricing formula is the only way to resolves the issues in the LPG value chain.

“The main reason for these developments is that the Consumer Affairs Authority (CAA) is not increasing the prices according to the pricing formula given by the Supreme Court,” Thilak De Silva, Group Managing Director of Laugfs Gas PLC, Sri Lanka’s only other cooking gas operator, said. He stressed that according to the formula, the price of a 12.5 kg cylinder of LPG needs to be further increased by Rs.199.

He noted that the Laugfs Gas has requested the CAA to increase prices of LPG by Rs.394 in order to reflect the global prices and the impact of the deprecating rupee.

However, he noted that CAA only agreed to increase the prices by Rs 195 which is not even sufficient to cover the costs. “The objective of the formula is to look after the whole LPG value chain from owners to dealers. Even with Rs.195 increase in LPG prices, we are still making losses. We need a further increase Rs.199 to break even,” he said. De Silva emphasised that not only distributors, dealers and companies, but banks were also unhappy with the current situation.

Laugfs Gas has about a 28 percent market share in Sri Lanka’s LPG market.

LPG distributors of the State-run Litro Gas this week revealed that the financial obligations of distributors have reached Rs.650 million and the banks have become worried of possible defaulting loans.

They said margins of the distribution business are becoming insufficient to cover the costs largely due to higher diesel prices. (NF)