COPE calls for audit on LP gas purchases by Litro

The Committee on Public Enterprises (COPE) has recommended that an investigation be conducted on the cancellation of the Term tender, which had been approved by the Cabinet to purchase LP gas from Siam Gas at USD 96 per metric ton and opting to buy 100,000 MT of gas at a cost of USD 129 per metric ton from an Oman company.

The investigation will be carried out through the Auditor General’s Department.

This recommendation was given on Wednesday when Litro Gas Lanka Ltd, Litro Gas Terminal Lanka (Pvt) Ltd. and Sri Lanka Insurance Corporation were summoned before COPE to implement the orders given by the previous Committee on Public Enterprises and to discuss the current performance.

It was revealed that since the Term tender for the purchase of gas ended last February, tenders were invited for 280,000 MT of gas and three gas suppliers had submitted bids accordingly. Siam gas Company submitted the lowest price as USD 96 per metric ton and thereby the Cabinet was received to award the tender.

The Litro officials said LP gas could not be obtained from Siam gas Company due to the economic crisis as banks in Sri Lanka were unable to submit the Standby Letter of Credit (SBLC) to Litro pursuant to the conditions announced during the bidding process.

They further stated that the company, despite the discussions held with its officials, expressed its unwillingness to supply LP gas without an SBLC as per the conditions presented during the tender invitation.

Due to this delay, as a temporary solution, Siam Gas Company itself has negotiated to obtain 15,000 MT of gas as emergency purchases, which is the gross amount of gas required for two weeks, but it was informed that they can supply only 6,600 MT and thus was unsuccessful.

Litro officials also said that the Omani company, which had offered prices at USD 129 per metric ton for the Term Tender, agreed to provide 100,000 MT of gas for 4 months at 25,000 MT per month.

Accordingly, after notifying the above facts to the cabinet, it was revealed that the term tender given to Siam Gas Company was cancelled and the Cabinet approval was received for the term tender to purchase 100,000 MT of LP gas from the Omani company.

A USD 70 million loan from the World Bank and 20 million of Litro Gas Lanka Ltd amounting to the tune of USD 90 million was used for this procurement, Chairman of Litro Lanka Muditha Peiris said.

The COPE chairman instructed the Auditor General’s Department to conduct a formal investigation and report whether the loan amount of USD 70 million from the World Bank was effectively used, and added that although the need for LP gas is a necessary emergency, buying from the Omani company at a higher price instead of the lowest bidder, Siam Gas company, may set a bad precedent in the future.

The committee also focused on the inability to purchase LP gas with the amount of USD 160 million allocated for the purchase of gas under the Indian credit line. The Litro chairman said that according to the conditions of the Indian government, it is a problem to purchase LP gas that is not produced in the country. It was also revealed that several rounds of discussions were held regarding this. The COPE chairman made a recommendation to the Secretary to the Ministry of Finance to look into this immediately and report within two weeks.

Attention was also drawn to the fact that the number of currently appointed members of Litro’s board of directors is only four. It was revealed that according to the legal status, there should be 5 members. Furthermore, since the Ministry of Finance appoints the members of the Board of Directors, COPE pointed out the need to appoint the Board of Directors to consist of representatives of the parent company. The COPE chairman recommended the Secretary to the Ministry of Finance to take necessary measures in this regard.

The COPE also discussed about holding both one official holding the company’s chairpersonship and Chief Executive Officer position. Even if the position of the company’s chairman changes, the presence of a permanent CEO position is essential for the good survival of the company. Hence, the committee emphasized the importance of working towards it as soon as possible. Furthermore, Litro Chairman said the Board of Directors has already taken a decision to deal with this situation as soon as this crisis is resolved. The committee recommended to take necessary steps and submit a report on this regard.

Litro Company’s ability to obtain financial support from Sri Lanka Insurance Corporation, the parent company of the Litro Company was also looked into. The chairman of the Sri Lanka Insurance Corporation, Vijitha Herath said the company was able to purchase LP gas in the past due to the deposit of nearly 5 billion rupees in a state bank.

Representing the Secretary of the Ministry of Finance, Saman Fernando, Deputy Secretary to the Treasury, Chairman of the Sri Lanka Insurance Corporation and former Litro Chairman Vijitha Herath, Litro Chairman Muditha Peiris were present at this meeting whilst Thesara Jayawardane, former chairman of Litro Company, joined online.

Parliamentarians Patali Champika Ranawaka, Mahindananda Aluthgamage, Anura Dissanayaka, Harsha de Silva, Sarath Weerasekera, Jagath Pushpakumara, Indika Anuruddha, S.M Marikkar, Jayantha Samaraweera, Nalaka Godahewa, Premnath C. Dolawatte and Madhura Withanage were present at the meeting held.