Sri Lanka’s latest international tender for liquefied petroleum gas (LPG) procurement has ignited controversy after state-owned Litro Gas Lanka Ltd quietly inserted a last-minute clause that critics say tilts the process in favor of its main rival.
The tender, floated on August 27 and closed on September 23, seeks 380,000 metric tonnes (±20%) of LPG for 2026. But in the final stretch, Litro amended its conflict-of-interest section with a new provision that permits bidders to lease a competitor’s facility—the Hambantota LPG terminal—without Litro assuming responsibility for logistics until delivery at its own terminal.
The insertion, under Section 11, Clause 4.2 (new Clause VIII), appears on the surface to offer flexibility. In reality, energy analysts warn it could push suppliers toward infrastructure owned by LAUGFS Gas, Litro’s direct competitor.
“This is like forcing a state company’s suppliers to pay rent to its rival,” one industry expert said warning of long-term risks to transparency and national energy security.
Hambantota vs Kerawalapitiya
The controversy stems from the sharp disparity between the two companies’ facilities. Litro operates a modest 8,000 MT terminal at Kerawalapitiya and relies on frequent shipments to meet Sri Lanka’s 32,000 MT monthly domestic demand. In contrast, LAUGFS controls a state-of-the-art 30,000 MT terminal at Hambantota, in addition to a smaller 3,000 MT unit at Mabima, giving it superior storage and transshipment capacity.
By permitting bidders to rely on Hambantota, critics argue Litro risks embedding structural dependence on LAUGFS, undermining its own position as the national distributor. The move has also rekindled political debates over whether critical energy infrastructure should be controlled or leveraged by competitors.
Old Proposals, New Flashpoints
This is not the first time Hambantota’s terminal has been at the center of controversy. In 2021, the government considered a public-private partnership that would allow Litro and LAUGFS to jointly use the Hambantota facility. Proponents, led by LAUGFS Chairman W.K.H. Wegapitiya, argued the move could slash import costs by around US$70 per tonne and help stabilize retail prices.
Although a special committee was appointed to study feasibility, the proposal stalled amid political resistance and concerns about losing strategic control of the national LPG supply chain.
Tender Integrity at Risk
Procurement specialists have raised red flags about the process. They argue that any material change to tender conditions must be issued as a formal addendum and circulated to all bidders. By slipping in a new clause without proper procedure, Litro risks legal challenges before the Procurement Appeal Board or even in the courts.
For foreign suppliers, the clause poses operational risks, including higher costs and reduced flexibility. For consumers, fewer willing bidders could translate into higher LPG prices and greater supply vulnerability.
With Sri Lanka still grappling with energy affordability and security, the Hambantota clause has exposed a dangerous fault line: whether state procurement serves the public interest, or the commercial advantage of private players.
