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LP Gas Distributors Association warns of imminent crisis in distribution due to unbearable financial situation

September, 26, 2018

Raises awareness on critical role they play in Sri Lanka’s economy despite increasingly difficult economic circumstances

 

The LP Gas Distributors Association of Sri Lanka (LPGDASL), the association that looks into the interests of its 35 Distributors, over 8,000 Dealers and over 75,000 dependents of the LP Gas industry, has warned that Sri Lanka is facing an imminent crisis in LP Gas distribution that could negatively impact the economy unless the relevant authorities take meaningful steps to address their longstanding grievances.

The association has stated that the key issue they are facing is the significant increase in transport and related overheads due to the increase in the price of Diesel to Rs.123, the increase in vehicle spare parts ranging from tyres to oils and high cost of human capital for what is a specialised job that requires regular training.

In order to remedy this situation, the association has requested that the present Channel Margin (for Distributors and Dealers) for distribution of Gas, which has not been reviewed since 2007, and the current District-wise Transport Margin, which was marginally revised only once in 2012, be revised to suit today’s economic situation in the country. Therefore, the association has called for a reasonable increase in the Channel Margin to 12% (7.5% to Distributors and 4.5% to Dealers) and the Transport Margin to be amended to a minimum of Rs.7 per km within Colombo District with a sufficient increase in percentage for all other Districts.

Addressing the gathering, Sathyendra Wijayapura - President of the LP Gas Distributors Association of Sri Lanka stated, "Since 2007, we have been adhering to the highest of business standards and doing our very best to ensure that there is no disruption whatsoever to the LP Gas distribution in Sri Lanka. We have borrowed from various financial institutions, invested heavily and overcome numerous challenges with the greatest difficulty to make sure that we have safely and efficiently made all our deliveries 365 days of the year for several years, so that both our domestic and industrial consumers are able to function smoothly. However, this latest round of financial burdens isimpossible to bearand it would mean that we would have to scale down our deliveries so that we can achieve a minimum profitto sustain our businesses. Such a scaling down would have huge ramifications on the domestic and industrial front and would trigger an economic downturn in the country, which is something we have always tried to avoid but would unfortunately happen unless the relevant authorities take immediate remedial action.”

Wijayapura emphasized on the fact that they do not intend to make the Consumer Affairs Authority of Sri Lanka (CAA), Litro Gas or the general public inconvenienced by a sudden shortage of LP gas caused by the inability of two organisations to look into their legitimate grievances. He added that their growing list financial commitments range from paying loan instalments, increasing staff salaries, lease instalments on vehicles, regular staff training, periodic marketing and promotions, vehicle insurance, maintenance and spare parts as well as safety equipment for employees. “As a result, all 35 Distributors find it impossible to continue their operations at this same high level due to the extensive outflow of finances. The most difficult part is the retention of trained staff, who we’ve invested heavily on, as they would seek alternative employment in the absence of solutions to their grievances,” he further added.

Liquid Petroleum Gas (LP Gas) is the most popular, convenient and economical energy source in the domestic and commercial cooking. Additionally, it is widely used in various large-scale industries such as hospitality and agriculture (animal husbandry).At present, over 5.5 million households in Sri Lanka use LP gas as the main source of cooking energy. Litro Gas enjoys over 73% of the market (over 4.25 Million Households) in Sri Lanka due to its state-of-the-art storage and filling plant in Kerawalapitiya operating through an extensive, well-equipped and highly-trained distribution channel consisting of a wide variety of Small and Medium Entrepreneurs spread throughout the island. The 35 Distributors use a large fleet of 600 6-wheel, 10-wheel and prime mover trucks to cover all parts of the island on a daily basis.

Litro Gas issues the filled gas cylinders from their Storage and Filling Plant to the Distributors strictly on immediate payment terms. The Distributors ensure that these cylinders reach the Dealers and subsequently the consumers in a safe and timely manner while delivering directly to most commercial establishments on varied payment terms. Additionally, the Distributors also keep a large stock of empty cylinders to distribute while maintaining at least three days stock in order to meet any delays that may occur at either at the Filling Plant or due to unavoidable circumstances such as poor maritime conditions, both of which may result in a possible stock out situation in the country. Distributors have played a crucial role in setting standards on safe and efficient deliveries of LP Gas to both household and commercial enterprises without any major calamity for the last 22 years. They distribute to a dedicated channel consisting of around 8,000 Dealers island-wide. In total, there are over 75,000 dependents in the LP Gas business as employees, stakeholders and service providers.