Litro Restructuring Sparks New LPG Tender Controversy

Sri Lanka’s largest state-owned liquefied petroleum gas (LPG) supplier, Litro Gas Lanka Limited, and its terminal arm, Litro Terminals (Pvt) Ltd, are moving ahead with a major restructuring process aimed at divesting government shares to private investors, amid renewed debate over transparency and energy security.

A senior Finance Ministry official confirmed that the government intends to sell either a majority or all of its shares in Litro under the ongoing state enterprise restructuring programme. “Bids were called for by the previous administration, and no action has been taken to cancel them,” the official said.

As of July 2024, eight bidders have been shortlisted to acquire stakes in Litro Gas and its terminal operations. The lineup includes major global and regional energy players such as Vitol Asia, Bharat Petroleum, Siamgas and Petrochemicals, Bgn Int Dmcc, Bayegan Dis Ticaret, Confidence Petroleum India, OQ Trading Limited, Tristar Transport, and a consortium between Infinity Holdings and National Gas Company SAOG.

This restructuring aligns with the government’s broader economic recovery plan under the US$2.9 billion IMF programme, which seeks to reduce losses from state-owned enterprises. Despite the ongoing divestiture, Litro has remained financially strong, paying Rs. 3 billion in dividends to the Treasury through its parent company, Sri Lanka Insurance Corporation, in 2024.

However, a new controversy has erupted over a tender amendment that critics claim may compromise fair competition. The latest international tender floated by Litro on August 27, 2025, to procure 380,000 metric tonnes of LPG for 2026, included a last-minute amendment before its September 23 closing date.

Under the new Clause VIII in the conflict-of-interest section, bidders are now permitted to lease a competitor’s LPG terminal at Hambantota, though Litro disclaims responsibility for logistics or product handling until delivery at its Kerawalapitiya facility.

While the clause appears to offer flexibility, industry analysts warn that it effectively encourages bidders to rely on the Hambantota terminal operated by LAUGFS Gas, Litro’s main rival. “It’s like asking a state company’s suppliers to pay rent to its competitor,” said one energy expert, questioning the wisdom of embedding operational dependence on a private rival’s infrastructure.

Litro currently operates an 8,000 metric tonne terminal at Kerawalapitiya and a 400 MT storage complex at Mabima, covering only 8.4 days of national demand. Sri Lanka’s monthly LPG requirement averages 25,000–30,000 MT, with daily consumption at around 1,000 MT. Nearly 95% of LPG is imported, as domestic refinery output from the Ceylon Petroleum Corporation (CPC) remains minimal.

By contrast, LAUGFS controls a 30,000 MT state-of-the-art terminal in Hambantota, giving it a strong logistical and transshipment advantage. This has reignited long-standing debates about energy independence and the strategic control of critical storage infrastructure.

In 2021, the government considered a public-private partnership between Litro and LAUGFS to jointly use the Hambantota terminal, with potential cost savings of US$70 per metric tonne. The proposal, championed by LAUGFS Chairman W.K.H. Wegapitiya, was shelved amid political uncertainty and security concerns.

Procurement experts warn that any tender modification must be formally issued as an addendum to all bidders. Failure to do so could invite legal challenges before the Procurement Appeal Board or even in court.

For foreign suppliers, the clause introduces cost and logistical risks, while for Sri Lankan consumers, fewer competitive bids could mean higher prices and weaker supply security.

As the restructuring and tender processes unfold, Litro’s future hangs between reform and risk—a test case for Sri Lanka’s ability to modernize state enterprises without compromising public interest or market fairness.