No more gas queues | Sunday Observer

No more gas queues

6 August, 2022

It is unlikely that anyone visiting Pettah has not heard of the Gas Works Junction, more commonly known as the Gas Paha Handiya by the locals.

The junction was thus called due to the presence of a gas lit lamp post. The Gas Works Company of the yesteryears was located next to the Christian Church on Bodhiraja Mawatha, near the Gas Works Junction. It was later razed to the ground. Today it is a massive vehicle parking lot. Gas Works Junction has been popular for three industries in the area. First, for filling gas into lighters, secondly for cutting keys and thirdly for sharpening knives.

During the height of Sri Lanka’s economic crisis I decided to grace one of the ‘hotels’ at the Gas Works Junction to have a cup of tea. There are two such ‘hotels’ or rather local eateries at the junction called ‘Star’ and ‘Elite’. As I took my seat at one of these hotels, I witnessed the owner of the eatery bringing in something under what seemed like a heavy security detail. It was a 12.5kg LP gas cylinder. It was unloaded and Rs. 10 000 was promptly handed to the delivery man. The total number of gas cylinders unloaded was three, presumably at a cost of Rs. 30 000.

Curiosity

My curiosity piqued, I had to ask the waiter about what I had just witnessed. “The owner hardly visits the restaurant. He had to go all over Colombo in search of gas and even then he only managed to find three. The previous time we purchased each at Rs. 12 000. If he didn’t find these we would have to close shop. They deliver the gas to us for Rs. 10 000 each” he said as he placed a frothing cup of milk tea on my table. The price? Rs. 120 as opposed to the previous Rs. 50.

“It is difficult for us to even sell tea at Rs. 120 after buying a gas cylinder at Rs. 10 000. Most shops have closed down. There is no place to even get a cup of water here,” the waiter added.

I passed Gas Works Junction through People’s Park and arrived where the P.D Sirisena ground is located to witness a large crowd bearing empty gas cylinders. They were waiting for their turn to purchase gas under heavy Police presence. But not a single gas cylinder was delivered as expected. The crowds then decided to block the road while also blocking the entrance to the Gunasinghepura Bus Stand. They forcefully prevented buses from leaving the terminal and even stopped traffic on Bastian Mawatha by lining up their empty gas cylinders right across the main road. Despite repeated attempts by the Police, the crowds refused to disperse. In minutes an Army bigwig arrived under heavy guard. He delivered a speech to calm the public. This was a Saturday.

I have been appointed to this area. I will ensure you are provided with gas on Tuesday. Please disperse and unblock these roads.” he told the crowds. This message was greeted with the sound of whistles and claps. “Jaya Wewa! Jaya Wewa!” the people chanted.

“You people only could not move when your village Police asked of you!” an angered Policeman said as he spat on the ground next to him.

The next Tuesday tokens were distributed to those wanting to purchase gas. But again a truck bearing the treasured item did not arrive even by nightfall. This led to utter pandemonium. The Army bigwig who promised gas was nowhere in sight leaving the area Police to deal with the chaos.

Graveyard

Several weeks passed. As I passed the agency selling gas in the area it appeared empty as a graveyard. It was startling to see new and unpacked cylinders in the shop.

“Do I need an electricity bill to purchase a cylinder?” I asked. “No, nothing is needed. If you have an empty cylinder I can give you gas” the agency owner replied.

“But didn’t fights break out here just a few days ago over gas needing several people to be hospitalised?” I asked once again.

“We would have been beaten too. But not even a dog comes to purchase gas now. I am bored to death. While the gas fights were happening I was not even able to take a break” he said.

I only realised how much of an essential item gas has become to our lives when the country was hit with an acute shortage of it. Therefore I was keen to find out what led to this sudden shortage due to this crisis.

One was able to trace this dire situation to the month of February. Though it was reported that the import agreement of Litro with had ended on February 28, no one appeared to be concerned or understand the severity of the issue. This was likely due to the fact despite the end of the agreement, people continued to receive gas till March 2022.

According to information obtained it appears Litro had called for tenders seeking a new supplier of gas in January prior to the end of the previous agreement. However Litro was not able to grant the tender to the supplier chosen as it could not issue the Letter of Credit required for the deal.

Foreign exchange

Meanwhile, on April 8 Sri Lanka defaulted on its debt for the first time in its history. Due to the intensifying forex crisis by then, Litro was struggling to find the necessary foreign exchange to secure the deal for gas supply. As both State and private banks refused to issue Letters of Credit, Sri Lankan began its slow descent into a gas crisis even prior to the Sinhala and Tamil New Year. To the detriment of the public, the Chairman of Litro at the time had made no effort to initiate discussions with the existing supplier given the difficult circumstances.

On observation it is clear Litro was able to open a LC in the initial stages as the forex crisis was not as severe and the Central Bank also had the monetary ability to facilitate this.

Despite reporting the facts to the Cabinet, at the end all state and private banks refused to issue LC’s for the purpose. The people suffered as the cabinet informed Litro it was unable to intervene to ask banks to issue LC’s on behalf of the company.

This eventually led to an acute shortage of LP gas in the country as stocks depleted and the people hoarded. Around 80 000 to 100 000 consumers queued and protested. While they blamed the company, many were unaware of the company’s predicament.

They were of the opinion that since gas was not given out for free, the company is bound to provide gas to the people. However Litro was faced with the serious conundrum of converting rupees earned through sales into USD.

Consumers

In April, Litro from whatever dollars they could muster imported 3500 or 7500 metric tonnes of gas and released it to the market. This was only informed during the third week of April but it was not sufficient to meet the demand. In the end over 100 000 consumers ended up in queues and caused chaos as they were unaware of the real situation. In the end more than 4.5 million people queued up for gas. Though the demand was for 35 000 metric tonnes, Litro could only provide less than 7000 metric tonnes.

As the gas crisis worsened, restaurants were closed. It was the urban and apartment living people that suffered the most. During the last stages of Mahinda Rajapaksa’s premiership a bhikkhu residing in America visited to deliver a sermon for the final Poya Day program. Many had levelled criticisms against the bhikkhu. He related his experience to a radio station in this way.

“I was scolded because of the Government. When distributing gas they must prioritise those living in urban areas and apartments. But this Government is distributing gas to houses in rural areas that have access to acres and acres of firewood. Those living in flats are helpless as they are unable to cook their meals,” the thera said.

Meanwhile, a new job opportunity arose due to the gas shortage. That is earning a fee to safeguard gas cylinders kept in the queue. Thefts of gas cylinders also began to rise. Thieves would often create a scene at a queue. Then as crowds gathered or engaged in the fight themselves the thieves would run off with cylinders during the chaos.

When analysing the annual reports of Litro from 2015 to 2020, it was observed that at the end of the good governance era, Litro had fixed deposits amounting to Rs. 20 billion. Muditha Peiris was the chairman of Litro at that time and Litro was paying dividends of Rs. 11 billion to the treasury.

Price formula

However, by June 2022 Litro was in trouble. This was caused by Litro not increasing its prices on par with international prices. Lakmali Sinhapuarachchi, Finance Director of Litro says that although the gas price in the world market increased between October 2019 and August 2021, the ‘price formula’ was not in place to raise the price in the local market as the existing Government did not allow for it. She says that due to this, Litro’s Rs. 10.4 billion cash reserve dropped to minus Rs. 100 million by the end of 2021. But in 2019, Litro’s after-tax profit was Rs. 6 billion.

During the gas crisis, the majority of imported gas stocks were released to services and factories identified as essential services while only a handful of Litro’s nine million customers received gas cylinders for their needs.

Ranil Wickremesinghe studied this gas crisis in Sri Lanka carefully and the first thing he did as Prime Minister was to supply short-term gas through the Oman Trading Company for four months. Next Litro was advised to call tenders to find a new supplier for the next 12 months.

But due to certain allegations of corruption levelled by Keshara Jayasinghe the former Chairman of Litro against Oman Trading, suppliers became reluctant to provide gas to Sri Lanka. Suppliers were of the opinion that if such an incident has occurred the correct step would have been to take legal action rather than engage in mudslinging efforts against the company. As a result of this even other gas suppliers stopped supplying gas ‘on credit’ leaving immediate gas supply brought into the country not sufficient to meet the public demand.

Due to the current energy crisis in the world no country would risk losing its long term gas suppliers. The Chairman’s actions caused Sri Lanka just that. In the end he resigned and left the people to suffer the aftermath. Though an acting Chairman was appointed however he was unable to resolve the crisis as well.

After Wickremesinghe was appointed Prime Minister, Sagala Ratnayake was tasked with solving the gas crisis. His first step was to re-appoint former Managing Director and CEO Muditha Peiris to head the company. Peiris took over on June 15, and commenced discussions with Oman Trading and managed to strike a deal with the supplier.

The discussions with the World Bank commenced thereafter. It was Ratnayake who once again intervened. While Finance Ministry Secretary Mahinda Siriwardena and Central Bank Governor Nandalal Weerasinghe also participated, Litro Chairman Muditha Peiris said that the Exporters’ Association intervened and made a special intervention to find dollars for gas imports.

Now the whole country is awaiting help from the World Bank. While many parties engage in discussions, it must be done with utmost care as the World Bank is a strong believer in transparency not leaving any room for corruption, frauds or bribes.

The World Bank, analysing if Litro had worked in accordance with a proper system, took steps to give USD 70 billion for gas imports. It is historically the only project that was successful in the negotiations with the World Bank to secure aid in recent times.

Litro was able to strike this deal through a tripartite agreement. In addition to the funds supplied by the World Bank, Litro put in US$ 20 million to order 100 000 metric tonne of gas that would last till the end of October. This was able to give some relief for the people who had queued up for many days.

Currently there are no gas queues due to the 30 000 metric tonnes imported recently. Due to this agreement with the World Bank, there has been a significant growth in the country’s foreign reserves. According to this agreement, Litro has to settle the loan taken from the World Bank to the Central Bank within 5 months while the Central Bank must in turn settle it to the World Bank in 15 years. As a solution to Sri Lanka’s dollar crisis, the Treasury received an additional amount of US$ 22 million due to this transaction

Now, according to the advice of President Ranil Wickremesinghe a gas price formula has been put in place. The first step is to reduce the domestic gas price in parallel with the decrease in world gas prices. This is how the era of gas queues ended in a massive 22-day operation.

Sagala Ratnayake, Chief of Staff of the President, shared with us his thoughts about how the gas crisis was resolved.

We started this program by taking a risk. I even spoke to the parent company of the gas supplier. I tried to overcome the obstacles by bringing in officials to identify what the obstacles were. The measures taken by officials of the Central Bank and Litro have become successful today. I am pleased about this.

Perhaps in a week’s time, the gas crisis will end. The World Bank officials supported us immensely and helped us resolve this issue. Despite all the accusations we have been able to import gas through these efforts. I coordinated this by giving instructions to the officials. It has succeeded today.

The gas cylinder need now not be left forgotten in the corner of one’s kitchen. Neither should it be used as a decorative item. All consumers now must do is purchase a refill sans the queues and hassle. Instead of people waiting in line to purchase gas, today there are cylinders lined up waiting to be purchased by people.

The article is an English translation of Vajira Liyanage

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