• SOE delays in communicating to suppliers questioned
• Litro failed to secure SBLCs needed, international banks refused: Peiris
• Bidder with lower price could not supply demand: Litro
• COPE highlights loss to taxpayer, warns Litro about future tenders  

By Maheesha Mudugamuwa Controversy surrounds the spot tender for Liquefied Petroleum Gas (LPG) that was recently awarded to an Omani gas supplier, Oman Trading International Ltd. (OQ Trading) by the State-owned Litro Gas Lanka for the supply of 280,000 MT of LPG to address the months-long queues to purchase domestic LPG. At last week’s meeting of the parliamentary Committee on Public Enterprises (COPE) that discussed the alleged irregularities during the recent LPG procurement process, it was revealed that the costly deal could have been avoided if there had been proper communication and attempts made by the senior management of Litro. The time that had been consumed by the management during the communication process with prospective bidders was highlighted during the COPE meeting held with Litro officials, a lack of urgency which took place at a time when households that utilised LPG were struggling to feed their children, especially the urban population. The main concern of the COPE was the awarding of LPG tender to an expensive Omani company while rejecting the lowest bidder for the long-term supply contract – Siamgas and Petrochemicals PLC. It was revealed that Siamgas had agreed to provide 6,600 MT of LPG at a cost of $ 112 per MT, against the Omani deal of $ 129 for spot tendering for 15,000 MT, with a minimum order requirement of 100,000 MT. The LPG consignment is to be brought down using World Bank (WB) funds. The WB had agreed to provide $ 70 million for gas purchasing and the Government was tasked with providing $ 20 million. It was revealed at COPE that Siamgas had refused to supply gas at a rate of $ 96 on a long-term contract as agreed before as Litro had failed to provide Standby Letters of Credit (SBLCs) even though it was mentioned in the bidding documents. As explained by Litro Gas Lanka Chairman Muditha Peiris, Litro had sought suppliers for 15,000 MT of LPG on spot tendering as the term contract had been delayed. Litro officials who attended last week’s COPE meeting claimed that the decision had been taken to award the supply contract to the Omani company considering the availability of the supply chain even though it had proposed higher prices. According to them, even though the prices were lower than that of the Omani company, Siamgas had no capacity to supply in the manner of the Omani company. Peiris told COPE that the decision to cancel the Siamgas deal had been taken by the Cabinet and Siamgas had insisted on the SBLC for its supply. He alleged that the company did not facilitate nor show any intention of going ahead with international funds such as from the World Bank. As revealed to COPE, three bidders had submitted bidding documents for the procurement of long-term supply of LPG to Sri Lanka, namely Siamgas, Omani OQ Trading, and BB Energy Asia Pte. Ltd., with bid values at $ 96, $ 129, and $ 148. Accordingly, communications were shared between Sri Lanka and Siamgas which ended without any fruitful outcome as Siamgas had insisted on SBLCs for its supply. Soon after the new Chairman was appointed last month, he took a decision to import domestic gas into the country for four months from Omani company OQ Trading following an announcement by the Cabinet subcommittee. Roughly around two weeks ago, the company said stocks from Oman would arrive in the country within 14 days. It was also revealed that since Siamgas had quoted the price of the CIF value of $ 96 per MT of LPG while the price of OQ Trading was much higher at $ 129 per MT, the Government had to pay $ 33 more for the new arrangement. COPE also raised concerns as to why Litro had failed to enter into another long-term agreement by the time the previously existing agreement had expired. “Even international banks refused to open SBLCs given the current financial situation,” Peiris said, while vehemently denying the allegations levelled against the Omani deal and claiming that there was no hidden hand behind the deal. A drastic change occurred in the management of Litro Gas Lanka Limited recently following the replacement of its former Chairman and in parallel a new order for gas shipments was also placed by replacing Thailand’s Siamgas company which was approved by the Cabinet. By the time the decision was changed, Litro was to award the tender to Siamgas for four months following the completion of a procurement process. The previous tender received Cabinet approval on 3 May. The decision to award the contract for the supply of gas to the lowest bidder Siamgas was taken without extending the agreements that were approved by the Cabinet two years ago to award the contract of purchasing 740,000 litres of LPG for Litro Gas Lanka Ltd. to Oman Trading International Ltd. for a period of two years from 1 March 2020. The said agreement expired on 1 March 2022. Therefore, concerns have been raised over the awarding of the contract to the same company at a higher rate. According to the clarification given by Litro, it had called for international tenders for the supply of LPG during the period 2022-2023 under ICB on 9 January 2022. The tenders had closed on 16 March 2022. It had received bids from Siamgas – freight cost per MT at $ 96, OQ Trading – freight cost per MT at $ 129, and BB Energy Asia Pte. Ltd. – freight cost per MT at $ 148. Considering the lowest bid, the Standing Cabinet Appointed Procurement Committee (SCAPC) had decided to award the tender to Siamgas. However, the Government was not in a position to fulfil the condition to Siamgas by providing the $ 30 million SBLC to Litro Gas Lanka Ltd. In order to provide time to solve this issue and to mitigate the ongoing LPG crisis, it was decided to purchase LPG via spot cargo as a short-term solution. Hence, Litro had called for quotations from Siamgas and the second lowest bidder OQ Trading for spot cargo. In a letter dated 30 May 2022, Siamgas has declared that under the current economic situation, it was able to supply only 6,600 MT of LPG and that too at the rate of $ 112 per MT. Since the amount would only be sufficient to meet the demand for five days and this quantity being totally inadequate to meet the growing demand of the general public already facing an acute LPG crisis for their day-to-day requirements, Litro had proceeded with OQ Trading, which was the second lowest bidder in the aforesaid tender and had declared that it was in a position to meet the demand of LPG by giving an uninterrupted supply of 100,000 MT of LPG at $ 129 to Sri Lanka, which is sufficient for approximately four months. Given the acute LPG crisis faced by the general public and with the objective of mitigating and normalising the current situation, Litro had stated that the Cabinet had informed Litro Gas Lanka Ltd. to sign an agreement with OQ Trading on a temporary basis. Further, until the financial status of the Government improved, the company had been advised to cancel the contract with Siamgas and call for a fresh tender. Nevertheless, as highlighted by COPE Chairman Prof. Charitha Herath, the Cabinet decision must have been taken on the recommendations or explanations given by the Litro management. He added that Litro would have highlighted the supply difficulties rather than highlighting the costs affiliated with the order. According to Litro, there was a $ 17 difference between the two bidders OQ Trading and Siamgas, which translates to approximately Rs. 77.50 per 12.5 kg cylinder. In its statement, Litro stressed that the cost difference was not a significant burden proportional to the inconvenience faced by the public due to lack of LPG in the market. Yet, as highlighted at COPE, the country is incurring a loss of around Rs. 1,200 million due to the inability to properly enter into a long-term contract with the lowest bidder Siamgas. COPE members alleged that by highlighting the cost per 12.5 kg cylinder, Litro had indicated that the difference was not a considerable amount.   COPE Chairman Prof. Herath instructed the officials of Litro to expedite the long-term purchasing contract during the next three months to avoid going for yet another costly spot tendering, highlighting the fact that the desperate situation of the country had been used by companies to gain undue advantages. He urged the officials not to repeat the same mistake and if they did so, it would be a loss to the country, especially at a time when international agencies had come forward to help Sri Lanka ease the economic crisis. COPE members also highlighted the importance of avoiding misapplications of international funds at this critical juncture to prevent a worsening of the ongoing crisis. LPG shipments due this month Under spot tendering, Sri Lanka was expecting the first shipment of 3,700 MT from Omani OQ Trading company yesterday (9), with plans to commence distribution from today (10).  The second shipment of 3,700 MT is expected tomorrow (11) and a third shipment of 3,200 MT is expected on 17 July, according to Litro Chairman Peiris. As per Litro, more shipments are scheduled to arrive on 22 and 24 July and the total 100,000 MT supply is to be completed by the first week of August.