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Tuesday November 29th, 2022

Sri Lanka’s Litro gas to add 180,000 cooking gas cylinders to market

ECONOMYNEXT – Litro, Sri Lanka’s state owned liquid petroleum gas company currently embroiled in a controversy surrounding domestic gas cylinder-related explosions, said it will release 180,000 cylinders to the market in the next few weeks as demand for cooking gas increases in the market.

“Due to the high levels of demand for Litro gas, the company hopes to release 180,000 cylinders to the market, and its daily filling and distribution activities will take place 24 hours a day,” Chamani Pathirage, a spokesperson for Litro Gas Lanka Ltd said.

The company assured consumers that there will be no further shortage of gas cylinders in the market as it is taking measures to avoid future interruptions to the supply.

“We are trying to import machinery to improve quality and to speed up the manufacturing process to cover the time spent at the filling stations due to quality control of canisters,” Pathirage added.

More than 800 cooking gas explosions have been recorded in Sri Lanka since October 2021.

Last week a presidential committee concluded that most of the gas explosions were due to composition change in LPG.

“The cylinders, regulators, stoves, and other equipment have remained unchanged. What was subjected to change was the gas composition,” Prof Shantha Walpolage, the head of the committee appointed by President Gotabaya Rajapaksa, told reporters on December 22.

In April, Litro introduced a hybrid gas with a 50:50 (Butane and Propane) composition different to the historically used 70:30.

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.

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. (Colombo/Dec30/2021)

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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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