Formula
"The increase in price comes after a long period of discussions and negotiations during which the price of gas was kept artificially low and the company suffered huge losses," Shell Gas Lanka said in a statement.
Sri Lanka's Consumer Affairs Authority has moved out of a formula based pricing scheme in 2003 and had been controlling the price of LP gas which has been made into a political hot potato by the country's left leaning politicians.
Politicians in Sri Lanka have helped drive both the state-owned Ceylon Petroleum Corporation and the Ceylon Electricity Board into virtual bankruptcy by controlling their prices for personal popularity.
Sri Lanka also underprices diesel, which is used by richer sections of society such as politicians, super-rich businessmen and commercial transport while selling petrol which is used by motorcycle and small car users about 30 percent higher.
Meanwhile Sri Lanka's national currency has come under pressure and inflation has shot up due to difficulties in monetary and fiscal management brought by mis-pricing of energy.
However successive governments have been forced to de-stabilize the country due to opposition from mainly the Marxist nationalist Janatha Vimukthi Peramuna which opposes energy prices increases.
Pampering the Privileged
Sri Lanka's politicians, especially the left leaning ones, have a practice of pampering the already privileged, such as telephone users, electricity users, vehicle owners and pipe borne water users.
While the 'haves' get subsidized services, large sections of the population languish without a single electricity bulb or a drop of water because the financial position of utilities are too weak to expand services.
In newspaper advertisements taken over the weekend Shell Gas said its share capital has been wiped out due to accumulated losses.
Shell said only 30 percent of Sri Lankan households used LP Gas.
Out of the 175,000 tonnes a year LP Gas market, 70 percent went to household cooking use and 30 percent for industrial, commercial and hospital sectors.
Only 9 percent or 15,000 tonnes of LP gas were produced locally.
At the time gas was supplied by government, shortages were common and new cylinders were frequently not available.
Shell said the average household used a 12.5 kilogram cylinder for 2.5 months but urban users consumed about one cylinder a month.
Price
Shell said since 2004 when crude was 30 US dollars a barrel, the price of a litre of petrol has risen by 113 percent, diesel by 134 percent and kerosene by 167 percent while the price of a LP gas cylinder had increased only by 74 percent.
The company says a 12.5 kilogram cylinder had the equivalent of 22.32 litres of LP gas indicating the price was 48.61 rupees a litre based on the old price of 1,085 rupees a liter compared to 117 rupee for petrol, 75 rupees for diesel and 68 rupee for kerosene.
The company says volumes have grown 280 percent since it took over the then Colombo gas company in 1995.
"This has changed lifestyles and empowered women by freeing them from spending long hours in the kitchen," Shell Gas said.
Shell said LP gas was a cleaner fuel and by replacing firewood had helped protect forest resources.
Shell says a 200 rupee increase in a gas cylinder that is used up in a month, in a four person household where meals are cooked twice a day, would make the cost of a meal per person go up by only 84 cents.
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