Litro Gas Lanka’s efficient cost leadership ensures price increase covers costs

CEYLON TODAY | Published: 2:00 AM Oct 27 2021

The energy industry globally operates with fluctuating prices that determine the final price of LPG across markets. Globally, LPG prices have been shifting with demand and currency discrepancies, causing costs to soar and markets to tumble as one of the world’s most efficient and low cost energy sources go through turbulent times. 

The national LPG provider, Litro Gas Lanka has developed a cost leadership advantage which ensures that the price increase covers costs (as indicated in the chart below). Additionally, with 80% market share with capability of 8000 MT and 3000 MT storage and distribution, Litro Gas Lanka sustains a unique cost leadership price advantage that has been validated by the Consumer Affairs Authority as well. Litro Gas Lanka has been long recognised for its efficient optimisation of resources and costs, a key operational benefit that has seen the cost of operations remain low at a steady 6%. The price increase sustained by Litro Gas Lanka over the years affirm this.

 The only state owned entity to generate an outstanding revenue of Rs 50 billion, Litro Gas Lanka has consistently delivered exceptional economic benefit amounting to over Rs 11 billion up to now. 

The Company has paid Rs 34.5 billion as taxes to the state and Rs 13 billion as dividends to The Treasury. Litro Gas Lanka believes that the LPG industry in Sri Lanka has the potential for expansion and growth. Accordingly, the company has already submitted proposals towards consolidating the industry, to the Government, which are as follows:

 01. Litro Gas Lanka to operate the Hambantota Laugfs terminal for a management fee that will cover the operation cost and pass the income generated to Banks / The Treasury. 

02. Litro Gas Lanka to lease the Hambantota Laugfs facility on a long term lease of 10 years. 

03. Litro Gas Lanka to purchase 100% of the Hambantota Laugfs terminal via a consortium of investors.

 The Company believes that the proposed mechanisms will expand the industry and make the MRP more affordable to consumers. Litro Gas Lanka further says that a floating LPG storage that can store up to 40,000 MT, without any additional cost can be utilised if needed, to meet supply demand. 

Energy industry sources point out that the burden of servicing debt taken to finance the large facilities of Laugfs LPG terminal at Hambantota and plans to ease their 40 billion debt raised without substantiated collateral from several banks, mainly the state owned banks may impact the entire industry and the economy. Added to that is the fact that the Laugfs LPG storage facility at Hambantota is widely seen globally as a nonperforming asset.

 Further, the price of Rs 2,840 per 12.5 cylinder by Laugfs is indicative of the fact that as a privately owned company, Laugfs is sustaining losses incurred by a nonefficient process and must consolidate its efforts. As the national LPG provider with a strongly community focused approach, Litro Gas Lanka plays a pivotal role as the country’s energy industry leader. 

Throughout the years, the Company has always strived to maintain the customer value proposition even with price increases and market fluctuations; for an example, in 2013, when USD was at LKR 160.00, the company was selling a 12.5 cylinder at Rs 2,300.00. The current price increase therefore clearly covers our costs and does not include a profit margin to the Company, confirm company sources. Litro Gas Lanka believes that as the national LPG provider, the Company has a national energy mandate to fulfil to the people of Sri Lanka – a goal the Company is committed to. (Litro Gas Lanka)

CEYLON TODAY | Published: 2:00 AM Oct 27 2021

More News