Litro to come under PUCSL after restructure

The State-Owned Enterprises Restructuring Unit (SRU) will make recommendations to the Cabinet to have a regulator for Litro Gas with the divestiture of its entities, top officials said.

SRU Director General Suresh Shah told the Business Times that the SRU will be making recommendations for the Public Utilities Commission of Sri Lanka (PUCSL) to be the regulator for Litro Gas Lanka Ltd (LGL) and the Litro Gas Terminal Lanka Ltd (LGTL) after its divestment.

Industry analysts have raised concerns regarding the potential establishment of another private sector monopoly after the Litro Gas divestiture. They say that the entry of a new player with no government control could further merge power, resulting in an unfavourable scenario for competition in the gas market. Hence, the recommendation for a regulator, Mr Shah said.

With Sri Lanka lacking a monopoly law, experts suggest the nation should embrace the concept of allowing more players into the market. By doing so, the market would witness increased competitiveness and strategic growth in the long run.

“In a country as small as Sri Lanka, it is crucial to avoid the concentration of power in the hands of a single private monopoly. By inviting fresh players into the gas market, the government can push for a more dynamic and flourishing market structure,” an economist pointed out. This move would foster healthy competition among the players, ensuring fair pricing, improved services, and ultimately benefiting the consumers.

The guidelines for divestiture would be created by the Unit, incorporating input from experts in the field, according to Mr. Shah. Once the divestiture process is complete, the divested entities would then operate as holding companies. The profits generated by these entities would be distributed among the owners in the form of dividends, similar to how it is done in listed companies.

According to reliable sources, at least two foreign parties have stepped forward and submitted their expressions of interest (EOIs) in response to the SRU call.

The Treasury owns Litro Gas through the Sri Lanka Insurance Corporation.

The divestiture process will proceed through a two-stage competitive bidding process, with Deloitte Touche Tohmatsu India LLP (DTTILLP) appointed as the Transaction Advisor. The timeline to express interest closed on February 16 and the selection of shortlisted bidders will take place in early March.

LGL, with its commanding 85 per cent market share, currently holds the position of being Sri Lanka's largest supplier of Liquefied Petroleum Gas (LPG).