An Omani company is subtly trying to make both domestic gas suppliers, Litro and Laugfs gas companies financially disadvantaged and its local agency is pressuring the government through a most powerful religious leader Lankasara learns. This religious leader has asked a top government politician not to implement the cabinet paper prepared by the government to take over 40 percent of Laugfs Gas’ Hambantota terminal to Litro, which has the potential for a win-win situation to get rid of financial burdens for both companies. Although the cabinet paper has been presented twice it has reached a point where it has not been approved due to foot-dragging issues the sources said.
Despite the second cabinet proposal to Litro to invest in 40 percent of Laugfs Gas’ terminal, the deal has been referred to a five-ministerial cabinet subcommittee for further discussion.
The Litro Laugh partner’s proposal came after the Consumer Affairs Authority (CAA) did not allow the companies to increase the retail price of Liquid Petroleum in Sri Lanka in the wake of the recent increase in LPG prices in the world market. Laugfs Gas terminal Subsidiary of Laughs PLC, raised about the US $ 65 million to build the Hambantota Gas Terminal, with borrowing $ 22 million from People’s Bank and Bank of Ceylon. Laugfs Gas has incurred a huge loss due to not allowing gas prices to increase in Sri Lanka in line with international prices. The Laugfs Company representatives have met with the President to discuss the circumstances and came out with a solution that appointing a committee to address the issues. The committee came up with the above proposal and both parties have initially agreed on that.
Following that a draft Cabinet Paper was prepared and presented by the committee and arrangements were made to present it jointly under the signature of the Hon. Prime Minister and the Minister of Trade,
The LPG storage capacity (8,000 m/tons) located at Kerawalapitiya owned by Litro Gas can store LPG sufficient to three to four days or requirement, whereas the LPG terminal located at Hambantota International Port owned by Laugfs Terminals can store 30,000 m/tons which are around one month of LPG requirement of the country.
Litro gas currently imports LP Gas to Karawalapitiya terminal at a price of CP+ USD 105.4 and the existing terminal charge is around USD.31.67, totaling Litro’s landed cost of LPG per m/ton is USD.137.07.
However, Laugfs is currently importing LPG to their Hambantota terminal at CP+USD.35 per m/ton and the terminal throughput fee is USD.18 per m/ton totaling a landed cost of USD. 53 per m/ton. If Litro gas import through Hambantota Laughfs terminal and further transport to Colombo by the sea that will add another USD 30 per m/ton which will end up in a landing cost at Kerawalapitiya at CP+USD.83 per still a saving of USD.81.46 per m/tons. According to the analysts Litro is currently importing 420,000 m/tons per month and as per the expected synergy of this arrangement is an annual saving of USD 22 million (Rs.4, 540 million)
The combined purchase is expected to bring in an additional $ 20 per metric tons, and the new strategy is expected to generate an additional $ 9.6 million a year, benefiting both companies from the use of 44,000 vessels.
The proposal minimizes the losses incurred by Laugfs Gas’ failure to increase domestic gas prices, and predicts that the company’s current bank and Ceylon Bank balance sheets will also grow.
However, business sources told Lankasara that if the resolution is implemented, the third party, which makes a huge profit, will lose it, which will confuse the proposal in favor of both companies, and that there are several ministers and a powerful religious leader who has been strongly criticized by the government in recent days. . .