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Tuesday November 29th, 2022

Sri Lanka gas explosion probe says blame lies largely with faulty accessories

ECONOYNEXT – A committee appointed by Sri Lanka’s president to investigate a series of cooking gas explosions has found that substandard accessories such as hoses and regulators as well as the absence of odour were largely to blame.

A series of liquid petroleum (LP) gas related fires and explosions reported around the island led to a quiet panic among the populace in recent weeks. A total of 458 incidents were reported all year, according to a report by the committee that probed the matter.

The committee said in a statement on Monday (06) that the absence of a distinct odor was a major problem in the detection of gas leaks. Following discussions with all stakeholders, gas companies have agreed to increase the concentration of Ethyl Mercaptan, a gas that gives out a pungent smell, in new batches of LP gas cylinders going forward.

The statement, signed by committee chairman Prof Shantha Walpola, said there has been a significant reduction in LP gas related incidents in the country.

“It has been observed that 244 out of the total 458 incidents were complaints of leaks (as opposed to damaged cylinders, hoses, regulators, etc). Over the past few days, the public has been keen to check the condition of their gas cylinders and have reported such leaks,” Walpola said.

According to the findings, there has been only one incident where a gas cylinder sustained damages, while 178 cases of gas cookers exploding or the cookers’ glass tops cracking, possibly suggesting an unusually hot flame.

The committee urged the public to refrain from testing for gas leaks using unsafe methods.

The second cause for gas related issues the committee has found is substandard or expired equipment such regulators, gas supply pipes, hose clips and dilapidated furnaces.

“We urge all consumers who have not yet paid attention to this matter to purchase components that comply with the standards issued by the Sri Lanka Standards Institute and to purchase quality and safe gas stoves, especially from reputable and responsible agencies, ” Walpola emphasized.

The committee is also conducting studies to determine whether the issues arose due to a gas composition change as alleged by some quarters.

The committee said it studied data on gas composition and vapor pressure imported into the country during the last two years and evaluated the quality of the new system together with the Consumer Protection Authority, the Sri Lanka Standards Institute, the Industrial Technology Institute and the Sri Lanka Certification Board.

The Consumers Affairs Authority (CAA) announced that gases distributed from Monday (06) will have a new seal cover after new requirements were implemented.

An official of the state owned Litro Gas said the new red and white seal will be used to differentiate newly distributed the gas cylinders as per the CAA request.

The official said previously the color of the polythene seal would change weekly but it is not clear if this new polythene seal would be changed similarly.

On Sunday (05) CAA, allowing Litro to recommence distribution (which had been temporarily suspended) said older imported stocks were not to be released to the market, the level of odorant (ethyl mercaptan) to be increased to identify leaks and one in every 100 cylinders be inspected by the CAA.

On December 03, Sri Lanka halted the distribution of LP cylinders as scats of gas explosions rose steeply in the country.

President Gotabaya Rajapaksa appointed a committee on November 30 to probe the mystery gas blasts across the country. The committee was tasked with finding possible causes in order to provide immediate solutions to the issue, according the president’s media division.

Officials had acknowledged that the explosions are unusual, though there was some denial at first.

Litro Gas supplies to more that 80 percent of the Sri Lankan LP gas market, with the privately owned Laugfs Gas taking up the remainder. (Colombo/Dec06/2021)

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A new Sri Lanka monetary law may have prevented 2019 tax cuts?

ECONOMYNEXT – A new monetary law planned in 2019, if it had been enacted may have prevented the steep tax cuts made in that year which was followed by unprecedented money printing, ex-Central Bank Governor Indrajit Coomaraswamy said.

The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

The new law however will sill allow open market operations under a highly discretionary ‘flexible’ inflation targeting regime.

A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

Sri Lanka’s central bank generally triggers currency crises in the second or third year of the credit cycle by purchasing maturing bills from existing holders (monetizing the gross financing requirement) as private loan demand pick up and not necessarily to monetize current year deficits, critics have pointed out.

Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

In Latin America central banks trigger currency crises mainly by their failure to roll-over sterilization securities. (Colombo/Nov29/2022)

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Sri Lanka cabinet clears CEB re-structure proposal: Minister

ECONOMYNEXT – Sri Lanka’s cabinet has cleared proposals by a committee to re-structure state-run Ceylon Electricity Board, Power and Energy Minister Kanchana Wijeskera said.

“Cabinet approval was granted today to the recommendations proposed by the committee on Restructuring CEB,” he said in a message.

“The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of CEB & work on a rapid timeline to get the approval of the Parliament needed.”

Sri Lanka’s Ceylon Electricity Board finances had been hit by failure to operate cost reflective tariffs and there are capacity shortfalls due to failure to implement planned generators in time. (Colombo/Nov28/2022)

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Sri Lanka new CB law to cabinet soon as IMF prior action

ECONOMYNEXT – Sri Lanka’s new central bank law will be submitted to the cabinet as a prior action of International Monetary Fund with clauses to improve governance and legalize ‘flexible’ inflation targeting, Central Bank Governor Nandalal Weerasinghe said.

Under the new law members of the monetary board will be appointed by the country’s Constitutional Council replacing the current system of the Finance Minister making appointments.

“It will be a bipartisan approach,” Governor Weerasinghe told an investor forum organized by CT CLSA Securities, Colombo-based brokerage.

“The central bank’s ability to finance the budget deficit will be taken out. Thirdly the flexible inflation targeting regime will be recognized in the law as the framework.”

The law will also make macro-prudential surveillance formally under the bank.

There will be two governing boards, one for the management of the agency and one to conduct monetary policy.

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