COPE demands an audit of Litro’s LP gas purchases. The Committee on Public Enterprises (COPE) has recommended that an investigation be conducted into the cancellation of the Term tender, which had been approved by the Cabinet to purchase LP gas from Siam Gas at a cost of USD 96 per metric ton, in favor of purchasing 100,000 MT of gas from an Oman company at a cost of USD 129 per metric ton.
The Auditor General’s Department will conduct the investigation.
This recommendation was made on Wednesday, when Litro Gas Lanka Ltd, Litro Gas Terminal Lanka (Pvt) Ltd, and Sri Lanka Insurance Corporation were called before COPE to implement orders issued by the previous Committee on Public Enterprises and discuss current performance.
Since the Term tender for the purchase of gas ended in February, tenders for 280,000 MT of gas have been invited and three gas suppliers have submitted bids in response. Siam Gas Company submitted the lowest price of USD 96 per metric ton and the Cabinet approved the tender.
Litro officials stated that due to the economic crisis, LP gas could not be obtained from Siam Gas Company because banks in Sri Lanka were unable to submit the Standby Letter of Credit (SBLC) to Litro in accordance with the conditions announced during the bidding process.
They also stated that, despite discussions with company officials, the company expressed its unwillingness to supply LP gas without an SBLC in accordance with the tender invitation conditions.
As a result of the delay, Siam Gas Company negotiated to obtain 15,000 MT of gas as emergency purchases, which is the gross amount of gas required for two weeks, but was informed that they could only supply 6,600 MT and thus was unsuccessful.
Officials from Litro also stated that the Omani company, which had offered prices of USD 129 per metric ton for the Term Tender, agreed to supply 100,000 MT of gas for four months at a rate of 25,000 MT per month.
As a result of notifying the cabinet of the aforementioned facts, it was revealed that the term tender awarded to Siam Gas Company was cancelled, and Cabinet approval was obtained for the term tender to purchase 100,000 MT of LP gas from the Omani company.
This procurement was funded by a USD 70 million loan from the World Bank and a USD 20 million loan from Litro Gas Lanka Ltd, totaling USD 90 million, according to Muditha Peiris, Chairman of Litro Lanka.
The COPE chairman directed the Auditor General’s Department to conduct a formal investigation and report on whether the World Bank loan amount of USD 70 million was effectively used, and added that while the need for LP gas is a necessary emergency, purchasing from the Omani company at a higher price rather than the lowest bidder, Siam Gas company, may set a bad precedent in the future.
The committee also discussed the inability to purchase LP gas with the USD 160 million allocated for gas purchases under the Indian credit line. According to the Litro chairman, it is difficult to purchase LP gas that is not produced in India due to Indian government regulations. It was also revealed that several rounds of discussions about this were held. The COPE chairman recommended that the Secretary to the Ministry of Finance investigate this immediately and report back within two weeks.
The fact that only four members of Litro’s board of directors are currently appointed was also brought to light. According to the legal status, the group should have five members. Furthermore, because the members of the Board of Directors are appointed by the Ministry of Finance, COPE emphasized the importance of appointing the Board of Directors to include representatives from the parent company. The COPE chairman advised the Secretary to the Ministry of Finance to take the necessary steps.
The COPE also discussed having one official hold both the company’s chairpersonship and the position of Chief Executive Officer. Even if the position of the company’s chairman changes, the presence of a permanent CEO position is critical to the company’s survival. As a result, the committee emphasized the importance of getting started as soon as possible. Furthermore, Litro Chairman stated that the Board of Directors has already resolved to deal with this situation as soon as the crisis is resolved. The committee recommended that the necessary steps be taken and a report be submitted in this regard.
The Litro Company’s ability to obtain financial support from Sri Lanka Insurance Corporation, its parent company, was also investigated. Vijitha Herath, chairman of the Sri Lanka Insurance Corporation, stated that the company was previously able to purchase LP gas due to a deposit of nearly 5 billion rupees in a state bank.