LP gas, which is derived from the same barrel of oil as petrol, diesel and kerosene, is being sold in the Sri Lankan market at artificially low rates. Unlike petrol, diesel and kerosene, LP gas incurs additional costs on bottling and distribution, which makes it a more expensive product.

The Consumer Affairs Authority has capped the selling price of LPG at a low level while prices of petrol, diesel and kerosene have been allowed to increase almost in line with international oil prices.

While selling prices of petrol, diesel, kerosene and have been permitted increase of over 100% of, gas increases have been extremely low at 61% for the period 2004 todate. LP gas price has had the lowest increase of all products from the same barrel. This is a very clear case for adjustment of LPG selling price. A company source said interesting facts reveal that even Rs. 300.00 price increase in a cylinder actually means Rs. 10.00 per day. When divided by an average of four persons per household (average for Sri Lanka), the cost ins Rs. 2.50 per head per day. Taken one step further, if two meals are cooked in household per day, the average increase in cost is Rs. 1.25 per head per day. One cigarette or two candies could cover this cost.

Sources in the LPG business state that LP gas prices in Sri Lanka are artificially low because the cost of imported product has gone up by 135% from 2004 to 2007, whereas the selling price has increased only by 46%. We have been informed that LPG marketing companies have not only lost their entire margin, but are now operating at a gross loss.