Litro Gas Lanka enters into an agreement with Consumer Affairs Authority on LPG prices

Joint-agreement on a price formula after 2years of negotiation

7 October 2019 11:46 am - 0     - {{hitsCtrl.values.hits}}

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Following 2 years of extensive negotiations and deliberations, Litro Gas Lanka, Sri Lanka’s the largest importer and supplier of LP Gas has been able to arrive at an agreement with the Consumer Affairs Authority of Sri Lanka on LPG price. Accordingly, the Consumer Affairs Authority of Sri Lanka announced a price revision of a domestic gas cylinder by Rs.240 effective from midnight 4th October 2019. The revised price is effective for two months and the next price revision will be in November.

The agreement on LPG price revision is based on a robust pricing formula which Litro Gas Lanka has been mooting for more than two years. Previously, in the absence of an effective and practical pricing revision mechanism LPG companies have been incurring substantial financial losses in tandem with world LPG price (Contact Price or CP by Saudi Aramco) hikes or Exchange Rate hikes against the Sri Lankan Rupee – which are two of the most influential variables in deciding the retail price of LPG. Similarly, Companies were not able to pass down the benefits to the end consumer whenever the world LPG price (CP) or other factors were reduced at times. Hence, the new agreement on the formula will greatly benefit the Sri Lankan consumer. 

The new price revision mechanism, entered between the Consumer Affairs Authority and Litro Gas Lanka Limited was a result of years of negotiations and deliberations with the participation of the Cabinet Sub-Committee on Cost of Living and the Pricing Committee appointed by the Sub-Committee. The new price revision mechanism allows Litro Gas Lanka to revise the price of a gas cylinder based on the prevailing LPG World Prices (CP) and the Foreign Exchange rate every two months. Accordingly, the revised price is effective for two months and the next price revision will be in November. Whilst CP is low at the moment, the Saudi Aramco attack which took place recently is likely to trigger an upward trend which might be reflected in the November revision.

Four key variables collectively affect the profitability of LPG companies of Sri Lanka. This status quo is a unique challenge that the LPG industry face given that the four variables are beyond the companies’ control. The four variables include, LPG world prices, the retail selling price of a cylinder in the local market, the dollar fluctuation and the freight and shipping cost. 

Sri Lanka is now on par with most other nations and markets who had adopted pragmatic pricing formula for LPG. The new formula now guides and directs the price of LPG – an everyday need for most Sri Lankan consumers. Litro Gas Lanka expects that the gas pricing formula much like the fuel pricing formula in practice currently will be strictly adhered to by all parties concerned. 

 

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