Shell is forced to charge a higher price for gas than its competitors because it has to honour its contract with a Saudi supplier and furthermore has to pay in dollars against which the rupee has been performing poorly, a spokesperson for Shell Gas told The Sunday Island.

Currently a 12.5kg cylinder of Shell Gas costs Rs. 514. Shell has raised its price eight times since December 1999, at which time the price of a 13.5kg stood at Rs. 320. It was raised to Rs. 365 in January 2000. In February although the price of a cylinder was not changed, the weight was reduced to 12.5kg, effectively making the consumer pay more for the same unit of gas. Since then there have been five price changes, including the latest change which came into effect last month, i.e. Rs. 514 per cylinder or Rs. 555 per 13.5kg.

In contrast, Laugfs sells a 12.5kg cylinder at Rs. 409. Laugfs which only recently broke Shell’s monopoly controls 30% of the market, according to W. K. H. Wegapitiya, chairman of the company. Wegapitiya claims that they are able to offer a better price because they do not have high overheads like Shell does.

"We get LP Gas from two sources, the local refinery and from the world market. We purchase about 60-75% of our gas from the world market. But unlike Shell, which has spent a lot of money for their Terminal in Kerawalapitiya and for the off-shore facility which unloads gas from ships, the ships from which we get our gas comes straight to the harbour."

According to reliable sources, Shell incurs high expenses at the Conventional Buoy Mooring (CBM) because of delays in berthing due to bad weather. It is also claimed that the CBM is poorly maintained and is a potential environmental hazard as a result.

Steven Bartholomeuz, Corporate Communications Manager of Shell, claimed however that Shell has maintained the highest health, safety and environmental standards in all their facilities.

According to Bartholomeuz, Shell had decided to construct the CBM because "loading at the harbour is dangerous". He also claimed that the facility at Kerawalapitiya was constructed to ensure a steady supply of gas to the consumer. He explained that the Kerawalapitiya terminal had cost Shell 85 million US dollars and that it is the freight, insurance charges, terminal fees, taxes and levies in addition to the constantly changing interest rates that is forcing the company to raise its prices.

Shell has enjoyed a monopoly in the import and distribution of gas in Sri Lanka after the Colombo Gas and Water Company folded up. This paved the way for Shell to take complete control of the market.

When Laugfs entered the market, it was expected that the competition would drive prices down, but Shell has continued to raise it prices. Consumers have complained that this is mainly because Shell refuses to refund deposits on returned cylinders. The average consumer, it is argued, cannot afford to buy a new Laugfs cylinder without first obtaining a refund from Shell.

Shell has been insisting that cylinders be returned along with the receipt given at the time of purchase. Some of the original purchases have been made decades ago and it is unfair to demand that consumers produce them, users say.

Even when refunds are made, consumers complain that what they get is less than the purchase price and argue that this is how Shell is trying to maintain its control over the gas market.

Meanwhile, a third gas company, Mundo Gas, is planning to enter the fray shortly. (MS)