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| Sunday, 21 April 2002 |
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Business |  |
| News Business Features Editorial
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Shell Gas pegs price to int'l market prices Shell Gas Lanka Ltd. has linked its domestic LPG cylinder prices to a price ceiling mechanism similar to the model used by the Ceylon Petroleum Corporation (CPC) fro petrol and diesel. The pricing mechanism or formula adds up the various components of costs to bring imported LPG from the source to local domestic consumers, Shell Gas Lanka has said in a news release. This resulting maximum price level will be adjusted initially on a monthly basis, in a clear and transparent manner, similar to CPC's mechanism. The first such adjustment was implemented in March when Shell reduced its domestic gas cylinder price by Rs. 30 per cylinder in line with the lowering of global LPG prices in February. The International Monetary Fund Country Representative Dr Nadeem Ul-Haque has commended the pricing mechanism as a step in the right direction as it provides a formal and transparent framework for supplier-consumer relationships. "We are happy to see that the model already being used by CPC for petrol and diesel is now being extended to LPG as well," he said. "Such a mechanism will eliminate the misunderstandings on price that have plagued our LPG industry in the past," Shell Gas Country Chairman and Managing Director Roberto Moran said. "Furthermore, 49 per cent of the company is still owned by the government and is in the process of being offered to private investors. Thus, we have an obligation to clearly justify any price revisions directly resulting from international LPG price movements. As a company with a large investment and a long-term interest in Sri Lanka, Shell looks forward to ensuring that the business is sustainable and that we pass on the benefit of price reductions to the Sri Lankan consumer at every possible opportunity," he added. The key variables that fluctuate on a regular basis are the international LPG prices and the rupee-US dollar exchange rate, given that some of the components are paid for in foreign currency. The various components of the formula include the import and storage costs, government taxes and duties and recoveries of Shell Gas and its distributors and dealers. The pricing formula has been submitted to the Ministry of Commerce and Consumer Affairs through the Fair Trading Commission, who will jointly with Shell Gas and an independent third party, review the pricing process. The monthly frequency of adjustment will be evaluated to determine whether a less frequent adjustment might be more appropriate to reduce the volatility of prices for domestic consumers. Specific components of the build-up will likewise be reviewed, the company said. |
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