August, 24, 2018
Gas Distributors says Channel Margins not reviewed since 2007 for over 11 years and, Distribution in a Crisis
Amidst rising operational and management costs, representing the Sri Lanka’s largest Gas distributor chain, LP Gas Distributors Association of Sri Lanka (LPGDASL) says that they need an urgent revision in Channel Margins with immediate effect as their service costs had skyrocketed in recent years.
The move came at a time when reports outlined early morning today (24th August) that a decision was taken by the Cost of Living Committee of the state to increase the price of a 12.5 kg gas cylinder by Rs.158 with effect from tomorrow (25th August). This brings the price of a 12.5 kg gas cylinder to Rs.1,696. The move to allow the price increase follows requests made to the committee by the Litro and Laugfs gas companies on August 21 stating that a price increase was imperative as the price of a metric tonne of gas in the world market had reached USD 590.05 after being USD 469.50 per tonne in March this year. This is the second occasion the price of gas had gone up this year after it was increased by Rs. 245 in April. However, it should also be noted that the price of a 12.5 kg gas cylinder came down by Rs.138 in June 2018. Meanwhile although price of LP Gas had been increased by government the distributor and dealer margins are in a crisis due to rising cost in their operations.
Issuing a statement to media President, LP Gas Distributors Association of Sri Lanka, Sathyendra Wijayapura, said that the last revision was made in 2007 and 2012. He further stressed that the key issue evolving the distribution of Gas is the present Channel Margin for both distributors and dealers which is not reviewed since 2007 while the District wise Transport Margin was never addressed similarly except once in 2012 on a small scale.
LP Gas Distributors pointed out that Diesel Prices have gone up by Rs 23 since April this year (2018) and it is a 24.21% increase. Furthermore, the Government had increased the price of 4 star Diesel again in the end of July by another one rupee. The future vehicle standards being “Euro 4”, all the trucks that transport gas would have to shift to Euro 4 Standard in time to come and then the distributors will have to incur a further burden on the price. In addition due to the Sri Lankan Rupee’s depreciation against the US Dollar inputs needed for distribution process such as tyres, spare parts, lubrication service costs, lubrication oil costs and the financial costs for bank borrowing, leasing, safety gear and fire control equipments, has also increased.
“Distributors find it extremely impossible to continue their operations due to the extensive out flow of finances and the most difficult part is the retention of trained staff who would seek alternative employment in the absence of solutions to their grievances,” Wijayapura pointed out.
Wijayapura stressed that as a result distributors are reluctantly compelled to downsize the deliveries if this issue is not addressed immediately as every day that passes without a sufficient margin and a transport margin would push them to a severe financial crisis which would result in an acute shortage of gas to the household, Industries, Tourist Hotels and even for Crematoriums.
According to LP Gas distributors various representations made to the principal company, Sri Lanka’s Government owned Litro Gas Lanka Ltd, had not helped in finding a lasting solution to the issue as it has to be approved by Consumer Affairs Authority (CAA).
Distributors further said that Litro Gas says that the decision in this regard has to be taken by the CAA and has to be approved by CAA, whilst CAA says that they are still studying this issue.
Liquid Petroleum Gas (LP gas) is the most popular, convenient and economical energy source in the domestic and commercial cooking in addition to the industrial, hospitality trade and agricultural (animal husbandry) use on a commercial basis. At present over 5.5 million households use LP gas as the main cooking energy and there are two brands that is Litro Gas and Laugh Gas. Litro Gas enjoys over 73% of the market which is over 4.25 million households. Sri Lanka is equipped with as state of the art storage and filling plant situated at Kerawalapitiya operating through an extensive and well trained distribution channel consisting of a wide variety of Small and Medium Entrepreneurs throughout the Island.
Reporting by Devendra Francis