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Tuesday June 18th, 2024

Sri Lanka sees LP gas shortages re-emerge amid forex crisis

ECONOMYNEXT – Sri Lanka is likely to face cooking gas shortage again after the key suppliers have said local commercial banks are not opening letter of credit (LCs) to facilitate imports amid severe dollar shortage.

The island nation’s cooking gas dealers say they have already not receiving the adequate supply now.

The move comes as Sri Lanka’s forex shortage has worsened with lack of US dollars even to import essential commodities like gas and fuel amid expensive global commodity prices after the Russian invasion.

Sri Lanka is already facing a severe fuel shortage due to lack of US dollars to import fuel amid queues at pumps across the island and the country is already experiencing over seven hour power cut.

Laugfs Gas, Sri Lanka’s only private LP gas supplier in the duopoly market said there is only a little stock left as of Thursday.

“We will see a serious shortage. We have very little stock only sufficient for one or two days in the port,” W K H Wegapitya, Laugfs’ Chairman, told Economynext.

Laugfs Gas controls around 20 percent of the LP gas market in Sri Lanka while the state owned Litro supplies 80 percent.

Laugfs needs on average 15-30 million US dollars per month to import gas, Wegapitya said.

“We have been supplying around 15,000 tons to the market per month but with this forex issue we are finding it difficult to continue the supply specially with commercial banks not opening letter of credits for us to import gas,” he said.

Laugfs had been able to continue it’s supply in the past month with the support commercial banks that opened LCs for the company.

“With today’s situation, there will be another shortage of gas by next week,” he added.

Laugfs had also been re-exporting gas to Bangladesh, Africa and Maldives, but that also has been halted.

An official at state-run Litro Gas Lanka Ltd said the company is also facing the same situation and local banks are not opening LCs.

The island nation already suffered a LP gas shortage late last year after Litro changed the composition in gas which led to several explosions at household level, a commission report has said.

Supply Slashed  

“Gas is not coming these days. We only get a supply of gas on Tuesday and Friday. All my stocks of gas is over then and there. They are saying the shipment is not there and they don’t provide us with heads up,” Premachandra, a Litro gas dealer based in Kalutara told Economynext.

Premachandra had ordered 46 big Litro cylinders, 15 medium cylinders and 17 smaller cylinders but he got only 7 big cylinders, 10 medium cylinders and 5 smaller cylinders.

“This is not at sufficient for me. People are aware of the situation I think, and I hope it won’t result in panic buying like last time.”

Sri Lanka is going through a severe forex shortage resulting extended power cuts due to lack of fuel while other essential products including essential drugs are also facing a shortage in the market.

“I didn’t receive (required amount of ) gas today and I think today is the first day of the shortage,” a dealer based in Wattala who wants to remain anonymous told Economynext.

“Previously we were getting it smoothly. Now again it has started. I normally order around 45 to 50 cylinders however I only received 15 cylinders today which is a third of my normal supply. ”

Customers are complaining that gas dealers in their areas aren’t responding and if they do, often to be answered with “no gas”.

“Every time we expect a shortage we have to call Litro, roughly around 3 to 4 times just for their response to be ‘no gas’, a dealer based in Colombo’s commercial heart of Pettah said.

“People are starting to panic buy and lots of the news is going around by word of mouth, I don’t know when the next supply will come but I hope it comes soon.”

LP gas price to rise?

Since the onset of the Russian invasion on Ukraine, global commodity prices have been on the rise with crude
oil hitting 116 dollars per barrel on Thursday, the highest price seen in eight years according to foreign media.

“In parallel to that (crude oil price) in March, the price of one metric tons of gas in the international market increased by 135 USD,” Wegapitya explained.

“This is the first time we saw such increase. Along with the shipping cost increase the amount of gas we import has also reduced.”

He said normally Laugfs issues about 40,000 gas cylinders per day but by now they are unable to issue even 2,000 cylinders.

“If we do net get the LCs we need for the next few days, there will be a gas shortage in the next couple of months.”

Sri Lanka’s dollars shortage is induced by central bank’s controlled exchange rate 200 rupees against the USD, analysts say,  where as the dollar is sold at over 260 rupees in grey market. (Colombo/March03/2022)

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  1. John Stewart says:

    Ask Elon Musk (worth USD 250 billion) to buy Sri Lanka then all our troubles will disappear.

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  1. John Stewart says:

    Ask Elon Musk (worth USD 250 billion) to buy Sri Lanka then all our troubles will disappear.

Sri Lanka’s Ceylon Chamber links up with Gujarat Chamber

ECONOMYNEXT – The Ceylon Chamber of Commerce has signed an agreement with the Southern Gujarat Chamber of Commerce and Industry (SGCCI) to increase trade cooperation between India and Sri Lanka.

The MOU was signed by CCC CEO Buwanekabahu Perera, SGCCI President Ramesh Vaghasia, in the presence of Dr Valsan Vethody, Consul General for Sri Lanka in Mumbai, India.

“With the signing of the MoU, … the Ceylon Chamber of Commerce and SGCCI aim to facilitate trade between the two countries via initiatives such as trade fairs and delegations, business networking events, training programmes,” the Ceylon Chamber said in a statement.

“This partnership will open doors for Sri Lankan businesses to explore opportunities in Surat’s dynamic market and enable the sharing of expertise and resources between the two regions.”

Established in 1940, SGCCI engages with over 12,000 members and indirect ties with more than 2,00,000 members via 150 associations. It promotes trade, commerce, and industry in South Gujarat.

The region’s commercial and economic centre Surat has risen to prominence as the global epicenter for diamond cutting and as India’s textile hub, and is ranked the world’s 4th fastest growing city with a GDP growth rate of 11.5%

Surat’s economic landscape is vibrant and diverse. As India’s 8th largest and Gujarat’s 2nd largest city, it boasts the highest average annual household income in the country.

The nearby Hazira Industrial Area hosts major corporations like Reliance, ESSAR, SHELL, and L&T. (Colombo/Jun18/2024)

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Sri Lanka telecommunications bill some clauses ruled unconstitutional by SC: Speaker

ECONOMYNEXT – Sri Lanka’s Supreme Court has found a number of clauses in a proposed amendment to the Telecom Telecommunications Amendment bill unconstitutional, speaker Mahinda Yapa Abeywardana said.

“Clause No 8, proposed section 9A 2 of the bill is inconsistent with Article 12 1 of the constitution, however this inconsistency shall cease if word ‘may’ will be replaced with word ‘shall’ as set out in the determination of the supreme court.”

“Clause No 9 is inconsistent with Article 12 1 of the constitution and only can be passed with special majority required under paragraph 2 of the Article 84. However, the inconsistency shall cease if clause is amended as set out in the determination of the supreme court.

Clause No 12, proposed section 17 10 of the bill is inconsistent with Article 12 1 of the constitution and can only be passed with special parliament majority required under Article 84 paragraph 2. However, the inconsistency shall cease if clause is amended as set out in the determination of the supreme court.”

Sections of clauses 13, 18, 20, 33 and 35 were also in violation of the constitution, and could only be passed by a special majority of parliament. (Colombo/Jun18/2024)

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Sri Lanka to exempt one house from imputed rent wealth tax: President

ECONOMYNEXT – Sri Lanka will exempt one house from a proposed wealth tax outlined in an International Monetary Fund program, President Ranil Wickremesinghe said.

About 90 percent of the people’s houses are likely to be exempt from the proposed tax, he said.

“[O]ne house will be exempt from this,” President Wickremesinghe told parliament Monday.

“It is going to have a very high threshold and I do not think the vast majority of the people in this country should even be worried about their house

“Don’t worry your house will be safe.”

The IMF program document however did not mention an exempt on one house, but did mention a threshold.

Taxing houses and thrift in general could have detrimental effects on people’s well-being housing stock and their willingness to remain in the country without migrating, critics say.

Related Sri Lanka to tax imaginary rents on houses under IMF deal

The mechanism of imputed rents was used because rates on houses was assigned to provincial councils and courts could strike it down.

Opposition legislator Harsha de Silva said the Samagi Jana Balwegaya welcomed President Wickremesinghe’s statement. (Colombo/June18/2024)

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