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Monday November 29th, 2021
Energy

Sri Lanka CAA tries to end LP gas shortage created by price controls with Rs363 hike

ECONOMYNEXT- Sri Lanka’s Consumer Affairs Authority, the country’s main price control agency, has raised a controlled price of cooking gas, in a bid to end a shortage it created by putting a private supplier out of business, leading to long queues amid a Coronavirus crises.

However it is not clear whether the new price ceiling is sufficient for Laufgs Gas to resume sales with raw material prices having risen further in July from the May June levels when a request for 475 rupee hike was made.

“The Consumer Affairs Authority has given the permission to increase the price of a 12.5 kg gas cylinder by 363 rupees and a 5kg gas cylinder by 145 rupees,” Minister Lasantha Alagiyawanna told reporters.

“Therefore Laugfs Gas company now can sell 12.5 kg gas cylinder which they sold at 1,493 rupees to sell at 1856 rupees.

“And a 5kg gas cylinder which was sold at 598 rupees to sell at 743 rupees. The government has given them the permission therefore they can start selling the gas even from tomorrow under new prices.

“But the government’s Litro gas company will continue to sell the gas at the same price we sold.

Laugfs Gas has made an application to increase the price of a cylinder by 475 rupees based on the average cost of cooking gas which is a mix of propane and butane in the May-June period and it is not clear whether the firm can resume sales, industry analysts said.

By August the required price increase had gone up to around 650 rupees, industry analysts said.

LP Gas is a 30/70 mixture of Propane and Butane.

In May the Benchmark Saudi Aramco contract price for 495 dollars a tonne for Propane and 475 dollars for Butane.

In June the Propane price went up to 530 dollars a tonne and Butane 525 dollars a tonne.

In July the both the Propane and Butane prices rose to 620 dollars a tonne.

In August propane had jumped to 660 dollars a tonne and butane to 655 dollars.

The shortages created by CAA price controls also led to long queues amid a Coronavirus crisis.

Videos and pictures of long queues with cylinders in the Western province went viral in social media, putting pressure on the government to act on the gas shortages.

Laugfs Gas Plc halted import and distribution of liquefied petroleum gas last month as authorities had denied a price hike despite soaring costs.

The firm had lost 954 million rupees in the March 2021 quarter as global prices rose and it was denied price hike. Laugfs is estimated to have a 20 percent market share.

The CAA had previously created shortages of items like tinned fish and lentils through its price controls.

When a government agency controls prices, supplies dries up, traders and consumers hoard goods and a shortage and a black market is created.

In countries with high level of economic literacy among politicians and bureaucrats markets are allowed to function.

Global energy, foods, base metals and precious metals have gone up amid liquidity injections by the US Federal Reserve. (Colombo/Aug11/2021)

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