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Monday March 4th, 2024

Sri Lanka presidential probe on gas explosions contradicts previous official claims

The presidential committee handing over its report to the president

ECONOMYNEXT – In a swift and blatant contradiction of a claim by key government officials that substandard accessories had caused some 800 cooking gas explosions in Sri Lanka since October, a presidential committee which probed the matter said on Tuesday (21) that a controversial composition change in the gas cylinder was, in fact, largely to blame.

Prof Shantha Walpolage, the head of the committee appointed by President Gotabaya Rajapaksa, told reporters that the hotly debated composition change was the main reason for the recent series of explosions which had become a major safety hazard to the public.

“The cylinders, regulators, stoves, and other equipment have remained unchanged. What was subjected to change was the gas composition,” Walpolage said, a day after his committee presented the fact finding report to President Rajapaksa.

More than 800 gas cylinder related explosions have occurred since October 28.  A 53-year-old woman was killed in an explosion that occurred in central Sri Lanka earlier this month, and no one has yet to officially take responsibility for the tragedy.

Related: Sri Lanka’s mysterious gas explosions become nobody’s baby

Walpolage said the conclusion was arrived at through a scientific data collection method, with information gathered from all stakeholders including both gas companies, the state-owned Litro Gas Lanka Ltd and Laugfs Gas (Pvt) Ltd, that make up Sri Lanka’s liquid petroleum (LP) gas duopoly. Data was also collected from testing labs and select locations where explosions had occurred.

As a short term solution, the expert proposed that the propane content in the gas cylinder be reduced to 30 percent while adding more ethyl mercaptan, a pungent-smelling chemical compound used as an additive for consumers to detect any leaks, to the mix.

Former Consumer Affairs Authority Executive director Thushan Gunawardena told media as early as April, well before the recent spate of explosions, that Litro had changed the composition of the gas inside the cylinders and increased the propane content to above 30 percent, while reducing butane.

The Court of Appeal earlier this month ordered that both Litro and Laugfs maintain a mix of 70 percent butane and 30 percent propane in the LP gas cylinders they sell, following the revelation.

Experts have hypothesised that increasing the propane content of the cylinder to 50 percent had resulted in high pressure which had led to leaks from the cylinder. However, this has yet to be proven scientifically.

Contradictory view at PMC briefing

The presidential committee’s finding, however, is completely contradictory to what some senior officials had said barely a day earlier at the Presidential Media Center (PMC), just before the Walpolage-led committee handed over its report to President Rajapaksa on Monday (20).

Jayantha de Silva, Secretary of the Ministry of Technology which is under the purview of President Rajapaksa, and Senior Deputy Inspector General (SDIG) Deshabandu Tennakoon who spoke at the event claimed that used regulators and stoves could have been the reason for the explosions.

“The investigations carried out in many parts of the country have revealed that the equipment used for gas stoves, including the regulator, are substandard,” de Silva told a virtual media briefing organised by PMC and moderated by President’s Spokesman Kingsly Rathnayaka.

“A lasting solution will be provided to the issue by enabling the people to purchase equipment that meet the required standards within the next three months,” de Silva said.

The ministry secretary said the responsibility of ensuring that the accessories meet the stipulated standards will also be vested with the two gas companies in the future.

Litro chairman denies composition theory

Litro Gas Lank Ltd Chairman Theshara Jayasinghe was on the same panel at the PMC’s media briefing where he ruled out the composition hypothesis, claiming that the reported change had nothing to do with the explosions.

Jayasinghe said that there is no change in the composition of Litro cylinders and  foreign expertise is being sought in this regard. The public need not have any undue fear when using LP gas, he added.

“Though some have suggested that the cause of the gas leaks and explosions was a change in the composition of the gas, it has now been confirmed that none of the incidents reported so far have been caused by a change in composition,” he said.

The company has agreed to provide an insurance cover of one million rupees per person if such an incident occurs due to the standard of the gas, he said.

“Recommendations with Sri Lanka Standards (SLS) certification for LP gas have now been issued, and the gas composition is a mixture of 70% butane and 30% propane.”

Senior DIG Tennakoon said at the same media briefing that the Government Analysts’s department has conducted comprehensive investigations into the incidents.

“It has been reported that the majority of incidents have occurred due to substandard gas stove accessories and the improper use of such equipment,” Tennakoon said.

He said more than 15,000 cases of gas stove and regulator-related repairs were recorded throughout the country in 2019 as well as 2020, according to a police survey.

There is no cause for taking legal action as it has not been scientifically proven that these were conducted with a criminal intent, said Tennakoon.

At the event, the public was also asked to purchase higher quality gas stoves and equipment that meet the standards and from reputed companies. (Colombo/Dec22/2021)

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Sri Lanka rupee opens at 308.20/50 to the US dollar

Sri Lanka stocks reversed its falling trend and gained for the first time in six sessions on Tuesday closed stronger on Tuesday (21).

ECONOMYNEXT – Sri Lanka’s rupee opened at 308.20/50 to the US dollar Monday, from 308.80/90 on Friday, dealers said.

Bond yields were broadly steady.

A bond maturing on 01.08.2026 was quoted stable at 10.90/11.00 percent.

A bond maturing on 15.09.2027 was quoted at 11.90/12.00 percent from 11.90/12.05 percent.

A bond maturing on 01.07.2028 was quoted at 12.20/30 percent from 12.15/35 percent.

The Colombo Stock Exchange opened up; The All Share was up 0.60 percent at 10,755, and the S&P SL20 was up 1.24 percent at 3,077. (Colombo/Mar4/2024)

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Sri Lanka central bank swaps top $3.2bn by December

ECONOMYNEXT – Sri Lanka’s central bank borrowed US dollars from various counterparties through swap transactions, which had topped 3.2 billion US dollars by December 2024, official data show.

The net short position, including swaps disclosed by the central bank, grew by over almost 1.28 billion US dollars from December 2022 to 3,280 million dollars.

The gross position grew from 2,263 million dollars to 3,280 million US dollars over the year.

The central bank supported some state banks with dollars to cover their dollar exposures, which had since been paid back.

By December reported gross reserves of the central bank was 4,491 million US dollars, against swaps of 3,280 billion US dollars.

Swaps of around 1500 related to the People Bank of China.

Swaps allow a central bank to increase gross reserves, without raising domestic interest rates.

Swaps with domestic counterparties lead to liquidity being injected into money markets, which can be mopped if domestic credit growth is moderate.

At the moment many private banks have large dollar positions invested outside the country, which cannot be used for transactions domestically because of a money monopoly given to macro-economists. (Sri Lanka repays debt or collects reserves of U$5bn via banking system since rate correction)

However unwinding swaps after private credit has picked, or engaging in swaps after private credit has picked up, may lead to money being injected to maintain the policy rate, leading to excess credit by banks and balance of payments deficits and or currency collapses, analysts say.

Central bank swaps in the third quarter of 2018 led to a collapse of the currency under the ‘exchange rate as the first line of defence’ policy peddled to Sri Lanka, critics have said earlier.

Domestic currency proceeds of swaps were the primary ammunition to bust East Asian currencies in 1997-98.

Any depreciation after the swap proceeds have been used for imports (effectively mis-targeting rates) a central bank will run a forex loss.

The PBOC however had put a rule, preventing the use of the swap after gross reserves fell below 3 – months of imports, preventing Sri Lanka from getting into further trouble through the use of official reserves for private imports.

Sri Lanka’s central bank also used borrowings from the Reserve Bank of India, via the Asian Clearing Union to run BOP deficits.

Losses from exposed dollar positions of central banks which have gained ‘independence’ from fiscal rules and parliaments and engaged in macro-economic policy, including the Fed, have led to taxpayers bearing the losses in the end.

Swaps were invented by the Fed in the early 1960s, as it deployed macro-economic policy (printed money for growth) threatening its gold reserves and the Bretton Woods system.

Sri Lanka has other borrowings also, including from the IMF, which has made net foreign assets of the central bank negative. (Colombo/Mar05/2024)

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Sri Lanka loses MICE tourists to Thailand on minimum room rates

ECONOMYNEXT – Sri Lanka has lost Meetings, Incentive Travel and Exhibition travelers to competitors in East Asia and India due to minimum room rates as higher standard rooms were available in other countries at lower prices, industry officials said.

President of the Sri Lanka Association of Inbound Tourist (SLAITO) Nishad Wijetunga said they the industry managed to retain a majority of booking made before the minimum room rates were imposed by the state last year.

“However, there were MICE groups that were supposed to come and cancelled Sri Lanka and went to places like Thailand and other parts of India and we lost,” Wijetunga told EconomyNext.

“We know that large groups of MICE (tourists) are affected.”

India is a key source of MICE tourists to Sri Lanka.

Sri Lanka’s businesses have got used to protectionism and try to push up prices with import taxes to extract more money from customers using the coercive power of the state, with tiles and steel being among the most prominent examples.

RELATED: Stand-alone hotels unviable in Sri Lanka due to high construction, capital costs

High priced tiles and steel in turn makes hotels expensive to build and make the leisure industry less competitive, analysts say.

However, in tourism, unlike in building materials customers are not trapped within the country and are free to move to other markets.

Managing Director of CEC Events and Travels, Imran Hassan, said the industry lost groups to East Asia due to minimum room rate.

In one instance, an operator was in discussions to get a group of 900 passengers.

“And that moved out to Thailand,” Hassan said. “Like that, there are many instances that the minimum room rate was not conducive.”

Thailand in 2023 attracted 28.04 million tourists.

A group that used to come to Sri Lanka annually used to take 40 to 50 five-star hotel rooms. This time Sri Lanka competed by offering lower standard.

“This year, they’re only giving 10 rooms to the five-star hotels,” Hassan explained. “They are staying in smaller hotels because they can’t afford it because it has become so expensive.”

“But overall, we are working with the authorities to correct it.

“We don’t mind demand and supply situation taking the rates up as in the Maldives. But what we are saying is keep an open market.”

RELATED : Sri Lanka should say good bye to minimum room rates: President

President Ranil Wickremesinghe has said Sri Lanka cannot progress with protectionism and the country has to learn to face competition. (Colombo/Mar04/2024)

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