Clarification on misleading claims on pricing of Litro Gas 12.5kg cylinder!

Litro Gas Lanka caters to the bulk of Sri Lanka's domestic LPG gas requirements. The diminishing foreign reserves in Sri Lanka meant that importing LPG gas to the country had become a challenging task, over the past few months. However, Litro started distribution of 12.5kg cylinders since 11^th July once again and Litro Chairman Mr. Muditha Peiris says that the problem regarding domestic gas supply can be solved by the end of July.

In such a background, many people were also curious about the gas pricing as there had been few price revisions in the recent past. Viral social media posts claiming to be price breakdown of a 12.5-kilogram Litro gas cylinder claimed that the current selling price was significantly higher, and the actual value could be much lesser as the cost for LPG in each of the 12.kg cylinder was only LKR 612. However, our investigation found these claims to be misleading.

Social Media Posts

Social media posts expressed that there is a big corruption behind the gas prices and as much as Rs. 2700/- was being unjustly scraped off from the customers claiming that the actual price of a 12.5kg Litro Gas cylinder could be as low as Rs.2300. The posts also show a cost breakdown which claims the price component of gas inside each cylinder is Rs. 612.75

Facebook | Archived

Such posts were viral among Facebook users as seen below.

Fact Check

After analyzing the cost breakdown shown in these viral claims, we noticed that the shipping fee for one metric ton (MT) of gas had not been taken into consideration.

We had confirmed in one of our previous fact checks that Litro Gas pays 129 USD to Oman Trading Company as shipping charges for transporting one metric ton of gas. The fact check report in Sinhala can be read here.

This USD 129 value of Shipping charges for one MT of gas, had been mistakenly considered as the value of LPG gas in arriving at the cost breakdown in the viral posts and the actual cost of one MT of LPG gas had not been mentioned.

In this regard, we made an inquiry from Litro Gas Company to find out the actual cost for LPG gas along with other cost components with regards to a 12.5 Kg gas cylinder. Below is the cost breakdown provided by the Litro management.

Litro has given the cost of purchasing one metric ton (MT) of LPG gas (CP) as USD 725. Accordingly, the cost of gas contained in one 12.5 gas cylinder is 3350 rupees. According to our calculations also, the above values ​​were confirmed to be correct. (725 * 369.71) /1000 * 12.5 ) Here the dollar value has been considered as 369.71 as was mentioned in the Litro breakdown chart shown above.

Shipping charges and taxes are USD 129 per metric ton of gas. When it is applied to a 12.5 gas cylinder, that amounts to Rs.596. The Litro company has listed the other key cost items for a 12.5kg cylinder as Rs.590 for operational expenses and Rs. 373 for distributional expenses.

According to the sum of these four components, the price of a 12.5 kg gas cylinder amounts to Rs.4910. (Gas Cost Rs. 3350 + Shipping Charges & Taxes Rs. 596 + Operational Expenses Rs. 590 + Delivery Expenses Rs. 373)

Therefore, as per the Litro cost breakdown, 68% of the total cost of a gas cylinder is spent on purchasing LPG gas. Shipping charges and taxes contribute to a percentage of 12% from the total cost. Accordingly, 80% is spent on purchase and shipping charges and taxes.

We also looked into the current price of LPG gas in the international market.

We focused on the international price per metric ton of gas (CP). We were able to see that the gas purchase values mentioned by the Litro company, and the average international price (CP) figures are almost the same. A related web post can be read from here. Archived

Also, we checked the current gas prices in India from the Factcrescendo India team and found that although there are several companies operating in India, the prices are almost the same and the price of a 14.2kg cylinder is now around INR 1100 (nearly five thousand Sri Lankan rupees). Using this value on a 12.5kg gas cylinder in Sri Lanka, is costs around five hundred rupees more as compared to India

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Conclusion

During our investigation, we found that the social media posts claiming that the LPG gas cost component of a 12.5kg gas cylinder is only Rs. 612, hence the total cost could be as low as Rs.2300, to be misleading. This misinterpretation happened since the shipping and tax cost component which amounts to USD 129 per metric ton had been mistakenly considered as the cost item related to purchasing LPG gas metric ton.

According to the explanations given by Litro, and our calculations based on those values also, the gas cost for a 12.5kg cylinder is Rs.3350. The shipping plus taxes along with this gas cost amounts to Rs. 3946 per 12.5kg Litro cylinder which is about 80% of the total value of a gas cylinder.

Also, considering the international price per metric ton of gas (CP) we noticed the value given by Litro to be on par with current global prices as well, and comparing the LPG gas prices in India as well it was clear that providing a 12.5kg gas cylinder for Rs.2300 is not viable.