brand logo

‘Used World Bank funds during crisis and turned Litro around’

13 Oct 2022

  • Litro Chairman Muditha Peiris says he has turned loss-making enterprise into profit-making entity and claims lost LPG demand is recovering
BY Safrah Fazal The Liquefied Petroleum Gas (LPG) crisis caused by the depletion of the country’s foreign exchange reserves significantly curtailed Litro Gas Lanka Ltd.’s supply of LPG resulting in lengthy queues outside gas outlets. People standing in line with empty LPG cylinders was a common sight across the island this year. In the second half of the year, with the assistance of the World Bank, Litro Gas Lanka managed to eliminate the queues and provide some relief to its consumers through reduced prices. The Morning caught up with Litro Gas Lanka Chairman Muditha Peiris as he reflected on the company’s gradual turnaround to a profit-making State enterprise, and its ability to provide relief measures to consumers. Following are excerpts from the interview.   Litro was deemed one of the State enterprises with a record of continuous loss-making. How is Litro faring at present?   Before June – that is, before I took over office – Litro made significant losses. However, since July, we have been making reasonable profits.   What do you mean by reasonable profits? Can you provide statistics?   When I took over office, the price of a cylinder was above Rs. 5,000. However, it is now priced at Rs. 4,280, through which we make a very small margin of profit. We sell between 60,000 and 75,000 cylinders a day; therefore, in bulk, we are able to enjoy some profits.   How did you manage to recuperate the losses?   The losses were a culmination of mismanagement, hikes in the world gas prices, the Government not giving the price increases at the right time, and various other issues. When I took over office, we curtailed a lot of unwanted expenditure, and managed to introduce a new pricing formula with the support of President Ranil Wickremesinghe, President’s Chief of Staff Sagala Ratnayaka, Finance Ministry officials, the Consumer Affairs Authority, and Litro Gas officials. The world gas prices too have been conducive for this after I took over office. Whenever there is a gas price drop in the world market, we are able to give that benefit to the general public, and whenever there is a price hike, we will have to increase the prices accordingly. So far, so good, as we have been very lucky to experience gas price drops in the world market within these three months. Therefore, we consecutively slashed our prices in August, September, and October. All these have been instrumental in turning this company around. The company is stable now.   How have you managed to settle the loans that Litro has accumulated over time?   We have almost finished paying off the loans that had accumulated before I took over. Very soon, we will be able to finish paying off our debts. It is worth mentioning that we managed to obtain a $ 70 million loan from the World Bank. It is supposed to be a 10-year-plus long-term loan. The loan was actually given to the country. We utilised those funds to manage the crisis situation, and as soon as we receive money from gas cylinder sales, we will be paying it off to the Treasury in rupees.  The sum of $ 70 million is equivalent to Rs. 26 billion. We have already paid Rs. 6.5 billion for September, and have made plans to pay off Rs. 8 billion this month (October). By December, we will settle the balance. The Treasury can then utilise those funds elsewhere. I managed to use the World Bank funds during the crisis and turn Litro around.   There is talk that you are slashing the prices of LPG because the demand has declined, with people resorting to alternatives such as induction and infrared cookers, firewood, and kerosene cookers. What can you say about this?   It is true in a way. We have seen a 7-12% drop in the market for LPG. In the last six to 12 months, people haven’t had enough products in the market, so they were compelled to opt for alternatives. Due to that reason, I see people using LPG as well as alternatives to minimise their expenditure. What we observed about a month ago, however, is that those who shifted to alternatives are gradually returning to LPG again. That’s what is happening in the country.  Within the next three months, we expect whoever used alternatives to shift back to LPG. Also, with our new pricing, we have calculated and found that it is now cheaper to use LPG than firewood. A bundle of firewood is now priced at Rs. 100-200. Considering these factors, we expect that those who used alternatives will soon return to using LPG.   Are there other players entering the LPG market to your knowledge?   At the moment, it is only Litro and Laugfs Gas PLC. Also, Laugfs isn’t importing the quantity that they used to import. As the nation’s gas supplier, Litro had to take the responsibility of supplying to their customers as well, to a certain extent. There is a renowned hotel chain that was a Laugfs customer previously. They were on the verge of closing down, so we managed to supply LPG to them too.  As the State’s supplier of LPG, we are also supplying to their customers, especially the big customers. So, I don’t see a reason for another player. If there is, it is well and good, but I don’t see anything like that at the moment.   Is the term tender for the supply of LPG until early 2024 still under evaluation?   The term tender is with the Government and the Standard Cabinet Appointed Procurement Committee (SCAPC), and is under technical evaluation. We have sufficient stocks until end-November, by which time they would have finalised the tender. We are waiting for directions.


More News..