Litro Gas’ shaky deals in purchasing LPG

The Government purchased gas for an exorbitantly higher rate when the World Bank laid down conditions to purchase LPG for a lower cost; thus pushing the already burdened consumer towards further hardship (Pix AFP) 

Litro has offered the recent short-term tender (Spot Purchase) to the highest bidder; who is alleged to have close ties with a powerful minister in the present regime

Litro Gas Lanka is accused of deceiving the World Bank by abusing the funds that were provided to purchase low-cost Liquefied Petroleum Gas to overcome the acute gas shortage in the country.

Any such corrupt activity will discourage not only foreign aid, but also foreign investments.
The World Bank (WB) pledged Litro a credit facility of US $ 70 million to meet the acute gas shortage. One of their main conditions is said to be to purchase Liquefied Petroleum Gas (LPG) at the lowest price. But according to the documents this newspaper is in possession of Litro has offered the recent short-term tender (Spot Purchase) to the highest bidder; who is alleged to have close ties with a powerful minister in the present regime.

The price difference of a metric ton between this ‘successful’ bidder and the lowest bidder is a staggering US$ 55.

“This is a daylight robbery. When the World Bank has laid down conditions to purchase LPG for a lower cost, the Government of Sri Lanka has purchased it for an exorbitantly higher rate; pushing the already burdened consumer towards further hardship. Had Litro purchased LPG from the lowest bidder, they could have reduced the price of a 12L cylinder by about Rs.1500,” Litro sources added.   

At a time when the entire country is experiencing severe economic hardship Litro Gas Lanka Limited is duly established under the Companies Act No: 7 of 2007 and with the majority of shares held by the Treasury via Sri Lanka Insurance Corporation Ltd; the Treasury and government officials have abused the World Bank Funds to purchase LPG at a higher rate.

In May, Litro Gas floated a short-term tender to purchase gas amounting to15, 000MT and amongst the bidders were Siam Gas Trading, OQ Trading and Activs Oil Industry Supplies and Services.
Activs Oil Industry Supplies and Services has quoted the lowest, Siam Gas Trading was the second lowest and OQ Trading quoted more than the two former establishments. 

Litro overlooked the lowest two bidders and offered the contract to OQ Trading which is US$ 55 more than the lowest bidder- Activs Oil Industry Supplies and Services.
Activs Oil sent Litro Gas, two quotations on June 21, under two conditions. One quotation was for US$ 74/MT and the second quotation was for US$ 84/MT with a 30 days credit facility.
Siam Gas Trading sent their quotations on May 30 and June 1, for US$ 112/MT.
OQ Trading’s quotation was US$ 129/MT.

“Peiris never revealed oil rates of Activs to the general public. He only mentioned the rates quotes by Siam Gas and OQ Trading. Had the offer been given to Activs Oil, the country could have saved US$ 55 from each MT and if given to Siam Gas, could have saved US$ 17/MT” alleged the Litro sources on strict condition of anonymity.
At a meeting this newspaper had with Litro Chairman Muditha Peiris at his Office, when questioned why the lowest offer was ignored, Peiris indicated that he knew nothing about Activs Oil or the quotations they had submitted. When showed him the letter he has sent to Activs Oil regarding their submission, Peiris said that since it was an unsolicited proposal, the company cannot offer tenders without carrying out a technical evaluation. 
“We cannot offer a tender to a new party without carrying out a technical evaluation. They are not qualified to supply gas. That was why we considered only the other two lowest bidders,” Peiris said.

Although Peiris said so, when contacted by the Daily Mirror, Director International Business Development Activs Oil Industry Supplies and Services Prasanna Seneviratne, said that they could not send their bids for the long-term tender as they were not aware of the Litro’s said tender publication, but sent unsolicited offers for the short-term tender.

“How can Litro Chairman claim that we were not qualified because we submitted an unsolicited proposal for the Spot Purchase? It seems Peiris although serves as Litro Chairman does not know the difference between long-term and short-term tenders. Unlike for long-term tenders, for short-term tenders all bidders submit unsolicited proposals. In order to cover up their scams, Peiris is levelling allegations,” Seneviratne added.
 Prasanna Seneviratne, further clarified how their proposal was ignored by Litro Gas in order to offer the bid to a party they knew personally.

“To our knowledge, due to the delay in purchasing LPG through the long-term tender, Litro Gas called bids for spot

purchases and we-Activs Oil submitted an unsolicited offer with two proposals, which is only for short-term purchase. After receiving our unsolicited submission, Litro asked us for technical documents to audit Activs Oil technical capabilities to which we replied on time with supporting documents. Litro Gas never revert back to us to discuss further on the acceptance or whether there were shortcomings in our submission. They never wanted to offer the bid to us as high ranking officials at the Finance Ministry is alleged to have discussed that our offer will adversely impact their plan. That was why we wrote to the World Bank which led Litro to cancel the pending long- term procurement and call for a new long-term procurement by end July which was closed by August 15th,” Seneviratne claimed.  

According to Seneviratne, on June 21, Activs Oil has offered two options in pricing for Litro to decide what is suitable for them. Price option one was- US$ 74/MT and the payment terms and conditions were an advance payment of 40% along with the confirmed purchase order and the balance of 60% to be paid on cargo arrival in Sri Lanka through an unchangeable Letter of Credit (LC) issued by an international bank.

“Price option two was US$ 84/ MT and the payment terms and conditions were an advance payment of 40% along with the confirmed purchase order and the balance of 60% to be paid on a 30 days credit from the date of cargo offloaded in Colombo Port. Having given the lowest rates cannot understand why Litro ignored our proposal,” Seneviratne said.
He further said how they included an important note to the June 21 letter which states ‘on the successful completion of initial three to four shipments through any of the given pricing options a credit facility to a minimum of 10, 000MT could be negotiated for 90 days’.

“In writing, we also informed Litro Gas that the submitted quotation of US$ 74/MT is for a short-term contract and for an annual contract the prices can be negotiated to be lesser than the short-term price for their annual requirement of 280, 000MT,” Seneviratne said.
Siam Gas Trading has agreed to supply 6,600 and 9, 900MT respectively in five shipments at a rate of US$ 112/MT.  Although the Litro requirement was for 15,000MT, OQ Trading has offered their proposal to Litro a price of US$ 129/MT if purchase 100, 000MT.

Procurement regulations bypassed 

It is not clear how the new management decided to buy LPG from OQ Trading bypassing procurement regulations, at a higher rate of US $ 129 incurring a huge loss to the country and further burdening the hapless gas consumers.
“Former Chairman Vijitha Herath was happy to receive our lower rates and he made a report to the cabinet for their approval to offer the contract to us stating that our company has the capacity to deliver the required stocks as and when it is required. It is learnt that the Cabinet has not given the approval for us. We had the right to question Litro why the lowest bid was overlooked and offered the contract to the supplier which is US$ 55 more than our quoted price,” Seneviratne told the Daily Mirror.

Activs Oil meanwhile has made a formal complaint to the WB claiming that Litro has declined their offer of 74 US $ and has offered the contract to purchase at a rate of US $ 129 per MT, which would cost Sri Lanka US $ 55 more and that the WB should inquire into this deal entered into with the WB sponsored funds.
According to Seneviratne, after the Cabinet declined to grant approval to Chairman Vijitha Herath’s request, has made a request to the Chairman to sign the contract with OQ Trading to which Herath disagreed and had tendered his resignation with immediate effect.

“Herath didn’t want to be a part of a scam and tendered his resignation. Then came Muditha Peiris as Litro

Chairman and he honoured the Cabinet instruction and signed the contract with OQ Trading.     
According to Litro sources, OQ Trading was supplying LPG from last year up to February this year. Sources further stated how the two subsidiaries of  OQ Trading in Sri Lanka- the Dream Exporters and Importers and 3DH International Group are playing a major role to get their parent company to win the LPG tenders- whether it is long or short term, through influence.

“3DH International Group is a business enterprise owned by four individuals. One of the four owners is a powerful minister in the present government and that is why OQ Trading is always considered despite their higher rates,” inside Litro source alleged.

Be that as it may, Litro Chairman Peiris told the media why Litro had to overlook Siam Gas’ offer at Spot Purchase although they have quoted US$ 112/MT. Peiris claimed that Siam Gas though quoted a lower rate, failed to supply Litro’s requirement but was ready to supply a mere 6, 600MT when the country’s requirement was 15, 000 MT. 
Although Peiris claimed the reason to overlook Siam Gas was their failure to agree to supply 15, 000 MT, this newspaper showed Peiris the two letters dated May 30 and June 1, sent by Siam Gas, agreeing to supply 16, 500 MT either to Colombo or Hambantota Port in five shipments at a rate of US$ 112/MT. 

When Peiris was asked why he misled the masses, when there is proof that Siam has agreed to supply more than what Litro called for, Peiris told this newspaper that he had to check with one of his officers about the letter dated June 1.
“I wasn’t the Chairman at the time Spot Purchase was called for. The officer who handled these documents is out of office now and I will let you know whether the claim you made is true or not,” Peiris told the Daily Mirror. 
However, until this edition went for publication neither Peiris nor any officer from Litro sent any clarifications to this newspaper in this regard. 

When further asked whether Litro purchased only the required 15, 000MT from OQ Traders or the entire quantity of 100, 000MT as stated by the supplier in their offer, Peiris said Litro had to abide by the OQ Trading condition.
“OQ Trading said that we have to purchase a minimum quantity of 100, 000MT for the short-term tender. The proposal was submitted to the Cabinet and approval was given to purchase 100, 000MT for a period of four months. Out of this in July they supplied us 33, 000 MTs and on August 25, 000 MT. From this, we have a remaining stock that can be used for the month of September as well. We have made advance payments for the volumes we have purchased,” Peiris said.

Meanwhile, Prasanna Seneviratne further said how he met Director Procurement Litro Gas Lanka, Terrence Appuhamy in his office in July and gave him an offer promising to bring an overseas financier who will pay for the supplier on behalf of Litro with an option to re-pay within 180 days.

“When I met him in office to discuss the spot purchase issue, I was told that they entered into the agreement with OQ Trading the previous day. Then I forwarded the other proposal which was an excellent opportunity for Litro to grab as they get 180 days to pay back this financier. For giving 180 days of credit, Litro has to pay an additional 3% of the total invoice value. Director Procurement was overjoyed by this offer and suggested me to supply 10, 000 to 15, 000 MT. Since larger volume tankers cannot berth at Muthurajawela, I told Terrance Appuhamy that I can berth a 33, 000MT tanker at the Maldives and supply lesser quantities from there to which he agreed. I wanted them to send me a purchasing order so I will supply it within a few days. Appuhamy promised me to send an e-mail but to date, Litro Gas is silent,” Seneviratne said.

When Litro Gas was requested by this newspaper for an interview with Terrance Appuhamy or a contact number to get a comment from him to find out why he did not take action to place a purchasing order for a low cost LPG, the former refused an interview or a contact number. 
“The management does not want to give permission to meet him nor a contact number, but can send you his e-mail address,” Litro officials said.

Although they promised to send Director Procurement’s e-mail address to this writer the e-mail address was not

sent until the paper went to press.  
According to Seneviratne, Director Procurement was not interested in the offer of US$ 84 and requested to supply LPG at a rate of US$ 74 with a credit facility.
Seneviratne further said how he was approached by a Director of the Dream Exporters and Importers Pvt Ltd- one of the subsidiaries of OQ Trading and requested to supply low-cost LPG for them.

“As our prices are the lowest, when tenders were called, Dream Exporters and Importers Pvt Ltd promised to pay us an additional US$ 11/MT if we can supply LPG to them. Our quoted price for them was US$ 75/MT and with the additional US$ 11/MT, we agreed to supply them 5,000MT per month for a period of 12 months at a rate of US$ 86/MT. This negotiation took place just before the spot purchase tender was called. However, Dream Exports never gave us the promised offer. Later it was revealed how they prevented us from submitting our proposals paving way for OQ Trading to win the tender,” Seneviratne alleged.  
Meanwhile, it is learnt how the long term tender that was floated in January was not conducted transparently and planned to offer the same to OQ Trading.

“Again we saw how the lowest bidder was overlooked by the second bidder as of a decision taken by the Cabinet of Ministers claiming that the Finance Ministry cannot fulfill one of the bid conditions- to issue a Standby Letter of Credit (SBLC) to the supplier.
The lowest bidder was Siam Gas Trading of Thailand and their quoted price per MT was US $ 96 (Contract price + Freight 95 + Insurance 1US $).
The second lowest was OQ Trading and their price was US $ 129 per MT. BB Agency Asia Ltd quoted the highest and it was US $ 148 per MT.

The difference between the successful bidder Siam Gas Trading and the second lowest bidder OQ Trading was US$ 33 per MT. On May 3, the then Litro Chairman Vijitha Herath officially informed Siam Gas Trading that they are the substantially responsive lowest evaluated bidder and  stated the Standing Cabinet Appointed Procurement Committee (SCAPC) of the Ministry of Finance has intended to award the contract to supply 280,000 MT of LPG for 2022/2023 for a period of 12 months. 
The following day- May 4, the Director General, Ministry of Finance, wrote to Siam Gas Trading that the Ministry of Finance intended to award the contract to them. 

However, on June 23, present Litro Gas Chairman Muditha Peiris informed all three bidders, that the long-term tender has been cancelled due to the failure on their part to meet its own tender condition- to give an SBLC in favour of the supplier. 
When asked what the reason was to select OQ Trading for the long-term tender though the process was later suspended, Chairman Peiris said that it was due to the better credit facility offered by OQ Trading.

As a result of the massive loss to the country, on June 24, a complaint has been lodged to the World Bank by public interest litigation lawyer Nagananda Kodituwakku requesting them to suspend the US $ 70 million loan facility granted to the Government of Sri Lanka and to conduct an audit into the process followed by Litro to award the tender to the highest bidder misusing WB funds unjustly and unfairly. 
Speaking to Daily Mirror, Attorney-at-Law, Nagananda Kodituwakku said that he wrote to the WB on gross abuse of their funds at a time Sri Lanka is undergoing the worst economic collapse in its history.

“In the midst of this catastrophic economic crisis, corrupt politicians and government officials have colluded to subvert all norms of transparency and embarked on a fraudulent deal for the supply of LPG using the WB funds. The newly appointed Chairman Muditha Peiris soon after taking over office withdrew government-approved tender with Siam Gas and with no visible due process awarded the supply to its former supplier OQ Trading claiming that Litro got a better credit facility from them,” Kodituwakku alleged.
Kodituwakku has requested the WB to take swift action and force the government to award the tender justly and fairly which would be beneficial to the people of Sri Lanka.

By an e-mail dated June 29, the Grievance Redress Service (GRS) of the World Bank responded Kodituwakku thanking him for contacting them and has requested more information.
The e-mail further states, ‘The GRS is an institutional avenue for people and communities who believe that a WB funded project has caused or is likely to cause them harm of an environmental and/ or social nature to raise their concerns directly with the WB Management.

‘The GRS responds to complaints relating to WB financial projects, and we would therefore appreciate if you would please let us know the following,
1. Do your concerns relate to specific WB- financial projects? If so what is the name and location of the Project
2. What kind of harm as a result of a WB Financial Report?
3. What kind of relief are you seeking?

‘Once we receive the information, we will review your complaint. Please let us know if you have any questions’.
Responding to the WB questionnaire, Kodituwakku written back on June 30 stating that WB Financial Project is US$ 70 million to purchase low-cost LPG and how the Sri Lankan Government cancelled the approved long-term tender to buy 280, 000MT LPG at a rate of 96 US $ and instead decided to buy the same from another supplier at the rate of US $ 129 per MT. 

Meanwhile, it is learnt after the WB’s intervention the government suspended the purchase of LPG from the rejected bidder, OQ Trading Ltd of Dubai and called for international bids afresh for the supply of 280, 000MT for a 12-month period. 

By letter dated June 23, Litro Chairman Muditha Peiris wrote to BB Energy (Asia) Pte Ltd, OQ Trading Limited and Siam Gas Trading Pte Ltd cancelling the procurement for the supply of LPG for the year 2022/2023, as the government is not in a position to issue Standby Letter of Credit as per the terms and conditions of the contract due to the prevailing economic situation in the country.