IMPACT OF GAS PRICE INCREASE ON COST OF LIVING

COST OF LIVING AND GAS PRIZES

Cost of living is proportionate to, and depends on the prices of the consumer items and the management of the economy and trade by the governance. Gas plays a main role in cost of living. This is because the use of gas is fast increasing due to the shortage of traditional wood and want of clear, fast, energetic and convenient energy. Every drop of gas is imported in liquid form and distributed by two main companies ‘Litro’ and ‘Laugfs’ with full monopoly on trade and distribution. Gas prices have been revised/increased again by virtue of Section 18 of the Consumer Affairs Authority act as an essential item to the consumer when the prices of other consumer articles are outside price control under act no 9 of 2003 where only a limited number of consumer articles could be placed under price control. Every drop of gas imported, which is mainly used in cooking and food industry as the main source of clean energy in place of traditional wood, contributes to environment issues. The subject minister identifies the consumer items he considers essential based on a research by the CAA and will declare by a Gazette notification certain items as essential with the maximum price for the items being declared. Milk powder and cement are among some of the 30 items identified with maximum prices. Here the trader is free to sell other items freely at the chosen prices with a price tag which is a requirement under the regulations in the second part of the CAA act. It is informed that the price of a gas cylinder has gone up by Rs. 245 when the Gas prices in the international market have dropped from 590 USD to 450 USD based on ARAMCO standards which is a subsidiary of the Saudi Arab and Private syndicate on monitoring world oil prizes. A completed procedure is to be adopted by the CAA with an official inquiry conducted by members appointed with experts to decide on the prices generally contested in the highest courts. This procedure will take place if the companies are not satisfied with the increase in prices. Unfortunately no consumer organizations are concerned or intervene on behalf of the consumer unlike in other parts of the world where the consumer is organized and powerful.

CONSUMER NOT ORGANIZED IN SRI LANKA

The consumer in Sri Lanka is not organized as in other parts of the world in protecting and enhancing their due rights under the legal system. They accept whatever is given by the trader, manufacturer, industrialist, and the state (regulator – that is the Consumer Affairs Authority) in the absence of a vigilant and a powerful consumer movement. In the United Kingdom the Consumer movement and media (with magazine “WHICH” the powerful consumer magazine) are in the forefront working together assisted by – DTI Department of Trade and Industry the main regulator in UK on consumerism. EU, India, and other parts of the world consumerism is organized and powerful unlike Sri Lanka. Gas, a clean and cheap form of energy utilized in the household, and is now spread in the villages as a necessity in the household and industry- especially food industry on a large scale, which has a direct impact on cost of living with price increases on increase of gas. Traditional methods of generating energy have been replaced by the gas industry which is monopolized by two leading giants ‘Laugfs’ and ‘Litro’ (previously Shell) all over the country. This has made a direct impact on the cost of living. They have the countrywide network of distribution as a necessary consumer item which has a direct political and economic impact on the citizen and the state.

WHY ONLY GAS AS A SOURCE OF ENERGY?

Every drop of gas, which is a by-product in the oil industry, is imported and stored in terminals in liquid form and distributed by the network of the two companies. These companies are now demanding price increases via the regulator Consumer Affairs Authority, which has the authority under Section 18 of the CAA act to permit companies the increase of prices on an application made. This is of course after due consideration by the regulator on the justification of the request having considered all aspects of the demand for the increase. Gas is a protected item under the CAA with few other items declared by a gazette notification to control the maximum price to ease the consumer in the receiving end while protecting the trader who is expected to be fair and reasonable. Gas has become so important to the consumer and industrialist. Hence gas has become a powerful voice of the citizen to maintain the price to combat fast-growing cost of living due to other factors and price increases of food and consumer items. Gas is often used in place of fuel in many countries for cheap and clean energy. The traditional wood, the main source of energy, has an impact on environment which leads to deforestation and climatic issues. Many other innovative methods of cheap, clean and environmental friendly methods were introduced, but not properly marketed by the state institutions. Coconut/paddy husk, Bio Gas, solar Energy, Energy Saving methods and many types of alternative energy were used without success.

EFFECT ON COST OF LIVING

Gas prices have a direct effect and impact on the cost of living. These prices increase the cost of the householders and affects bakeries, consumers, industrial products and food/ consumer items. This is because gas is one of the main sources of energy next to electricity. Electricity is expensive. Unfortunately with the increase of gas prices there would be disproportionate price increases of all consumer items, which are not controlled by the CAA. The CAA is the main regulator responsible for the price increase. CAA is expected to make a decision considering the circumstances heavily contested by the powerful companies with the legal team in higher courts which often obtain their redress with high pressure legal and political as the inquiring officers at the CAA. Members of this board are influenced by the Minister in charge who always takes political decisions. The politically appointed Chairman of this board is often not competent to handle a difficult or crucial situation. We take this opportunity to demand the State to make arrangements to appoint an independent, competent and educated individual as the chairman of the CAA Chairman. This position is filled by an appointee named by the Constitutional Council.

THE ROLE OF CAA

CAA is the main Player/regulator in combating cost of living. There have been a series of deciding cases on this contentious issue, which has a direct political and economic impact on the country. Careful consideration is necessary regarding this issue. It is inevitable that the companies will take to litigation if they are not satisfied with the new price formula. Arriving at a compromise or finding a solution may not be easy especially with the incompetent and inefficient top ranking officers of the state institutions.

The CAA is an ineffective institution which has enormous powers to act on behalf of the public. It is learned that the Government is contemplating on meeting the authorities of the CAA in order to find ways of combating the rising cost of living. This they hope to do through the recently formed Apex body which will handle the economy! CAA is the best available main regulator responsible to the public in combating cost of living. The CAA has the authority to deal with consumer organizations and is active in educating the consumer, industrialist and trader to establish a proper consumer regime. How many consumer organizations have been formed and whether a single organization is active is a matter for the consumer to judge.