Litro LPG Procurement lacks Transparency

Litro LPG Procurement lacks Transparency

Amidst an economic crisis, Sri Lanka faces a substantial additional expenditure of $3.146 million, equivalent to Rs. 1.139 billion, due to the cancellation of the term tender initially awarded to Siam Gas Trading Ltd. for Liquefied Petroleum Gas (LPG) procurement. The National Audit Office (NAO) recently released a Special Report on LPG procurement by Litro Gas Lanka Ltd. (LGLL) for the year 2022/2023, pointing to a lack of transparency and raising concerns.

The report, issued on December 11, 2023, highlights that the unexpected financial setback led to the procurement of gas from OQ Trading Ltd. at a higher cost, despite Siam Gas Trading being the lowest bidder recommended by the Technical Evaluation Committee (TEC) on April 26, 2022.

Despite Siam Gas Trading being approved by the Procurement Committee on April 28, 2022, and receiving Cabinet approval on May 4, 2022, a new procurement process was initiated on June 13, 2022, leading to the cancellation of the term tender. Gas was then purchased from OQ Trading at a higher price, with a lack of clarity in OQ Trading’s prepaid conditions.

OQ Trading had stipulated prepaid conditions involving a value of $20 million or a certified Standby Letter of Credit (SBLC) for at least 100,000 MT. The NAO questions the omission of these conditions during the approval process. Litro Gas Lanka sought Cabinet approval to make payments without a bank guarantee, claiming it was their existing procedure, but the NAO found no evidence of a consistent methodology for such payments.

Despite objections and appeals, Siam Gas Trading, the lowest bidder, was not chosen. Instead, a new procurement process was initiated, leading to additional costs of $3,145,960 (Rs. 1,138,837,430) for the Sri Lankan Government. The NAO expressed dissatisfaction with the lack of transparency and prudence in the procurement process, emphasizing that these concerns were not addressed in Litro Gas Lanka’s communication to the Secretary to the Prime Minister.

The report also highlights delays in procurement activities, the failure to utilize grants, and issues related to demurrage payments. Additionally, it points out the extended tenure of the Head of the Procurement Division of Litro Gas without a replacement, raising questions about adequate qualifications and experience.

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