Litro Gas has clarified the truth behind the freight costs pertaining to the international LPG tender for 280,000 metric tonnes for the period 2022 – 2023.
This was in response to an allegation made by Nagananda Kodithuwakku who claimed that Litro had awarded the LPG tender to a company that had placed a higher bid instead of awarding it to the company which had quoted the lower bid.
However, Litro in a statement on Sunday (19) said that the international tender was launched for the purchase of 280,000 metric tonnes of gas for LITRO for 2022 – 2023 and that its lowest bid, which was ended on 16/03/2022, was tendered to SIAM Gas for a shipping cost of USD 96 per metric tonne, adding that this was already public record and there is no evidence to suggest that Kodithuwakku had researched and found anything new.
Accordingly, Kodithuwakku is promoting false propaganda, knowingly or unknowingly, they added.
Kodithuwakku, who reveals only the date of the letter sent to SIAM on May 03, 2022 with the approval of the Cabinet, either does not know the entire contents of the letter or deliberately conceals the rest of the letter for his own purpose, the sources alleged.
Kodithuwakku conceals the facts that there is a shortage of gas in the current Sri Lankan market, LITRO had requested the Supplier (SIAM) to to provide 15,000 metric tonnes of gas for June considering the tender bid price being only USD 96 per metric tonne as an emergency, as it takes some time to prepare standby letters of credit (SBLC) for the security of the Supplier, and the request was rejected outright by SIAM and urged on May 09, 2022 that a SBLC of USD 30 million be issued via an international bank and that the gas could not be supplied until the issuance of such a LC, sources further disclosed to LNW.
They went on saying that Kodithuwakku has deliberately ignored the fact that LITRO is currently unable to provide a LC amounting to USD 30 million due to the current crisis facing the country.
Replying to a letter from the state-owned gas company sent on May 03, 2022 requesting the supply of 15,000 metric tonnes of gas, SIAM responded on May 30, 2022 that such a consignment cannot be provided under this volatile situation and that they are able to provide 6,600 metric tonnes ten days after the issuance of a SBLC via a bank and that such an offer could be made for USD 112 per metric tonne, not US$ 96.
In the backdrop, the second lowest bidder Oman Trading (OQ Trading) called for an emergency purchase of 15,000 metric tonnes of gas and they stated that at least 100,000 metric tonnes of gas should be purchased at a rate of USD 129 per metric tonne. The rate was similar to the price they had initially offered for the tender.
The state treasury failed to provide them with SBLC due to the growing gas crisis locally and the inability of the lowest bidder SIAM to supply enough gas and worsening the situation, SIAM set out to offer conflicting prices. In the backdrop, the Sri Lanka LP gas market became a burning spot and the then LITRO Chairman Vijitha Herath sent a letter to the Finance Ministry on May 31, 2020 requesting financial assistance to obtain gas from OQ Trading in this emergency.
The Cabinet meeting held on 08/06/2022 accordingly concluded that SIAM would be the lowest bidder, but the government could not issue an SBLC in the event of a recession and neither the bank nor the Treasury would be able to provide such facilities, urging the SIAM tender to be called off.
The Cabinet also directed that a new tender be issued expeditiously and that measures be taken to implement the procurement procedure on a more favourable basis considering the economic situation. It directed the relevant parties to obtain gas from OQ Trading, the second lowest bidder, for these urgent public needs and to meet those needs by working on favourable agreements on a more favourable credit basis amidst the economic challenges.
Therefore, Kodithuwakku ought to understand that it was an emergency purchase, not a preliminary tender, and that SIAM’s withdrawal was not due to commissions but because the Sri Lankan government was unable to issue SBLC on behalf of the company, the LITRO sources further pointed out.
They also alleged that Kodithuwakku is in an attempt to provoke unrest among the people by equating the gas price to that of LAUGFS, Rs. 6800, against the backdrop where current LITRO Chairman Muditha Peiris has pledged that the price of a domestic LITRO gas cylinder will not exceed Rs. 5,200.
Timeline of events:
1. Litro Gas Lanka Ltd called for international tenders for the supply of LPG during the period 2022-2023 under ICB on 09/01/2022. The tenders closed on 16/03/2022.
2. Litro Gas Lanka Ltd confirms that the following tenders were received:
a. Siam Gas Trading – Freight Cost per metric ton at the rate of USD 96.00
b. O Q Trading - Freight Cost per metric ton at the rate of USD 129.00
c. BB Energy (Asia) Ltd - Freight Cost per metric ton at the rate of USD 148.00
3. The Standing Cabinet Appointed Procurement Committee (SCAPC) decided to award the tender to Siam Gas Trading.
4. However, the GOSL was not in a position to fulfill the condition to Siam Gas Trading by providing the USD 30 million – SBLC to Litro Gas Lanka Ltd.
5. In order to create time to solve this issue and to mitigate the rising LPG crisis, it was decided to purchase LPG via Spot Cargo as a short-term solution. Hence, quotations were called from Siam Gas Trading and the second lowest bidder O Q Trading for Spot Cargo.
6. By a letter dated 30/05/2022, Siam Trading declared that under the current economic situation, they are able to supply only 6,600 MT of LPG and that too, at the rate of USD 112.00 per metric ton.
Litro Gas Lanka stated this would only be sufficient to meet the demand for five days and this quantity is totally inadequate to meet the growing demand of the general public who are already facing an acute LPG crisis for their day to day requirements.
7. OQ Trading, who was the second lowest bidder in the aforesaid tender declared that they are in a position to meet the demand of LPG by giving an uninterrupted supply of 100,000 MT of LPG at the rate of USD 129.00 to Sri Lanka, which is sufficient for approximately four months.
8. In view of the acute LPG crisis faced by the general public and with the objective of mitigating and normalizing the current situation, the Cabinet informed Litro Gas Lanka Ltd to sign an agreement with OQ Trading on a temporary basis. Further, until the financial status of the GOSL improves, the Company was advised to float a new procurement tender with manageable payment terms.
9. The USD 17 difference between the two bidders O Q Trading and Siam Gas Trading and translates to approximately Rs.77.50 per 12.5kg cylinder, which is not a significant burden proportional to the inconvenience faced by the public due to lack of LPG in the market.