A Malaysian investor, struggling with rising costs and a deteriorating security situation, almost wanted to pull out of Sri Lanka until a re-structuring of the investment changed his mind.
"With the uncertainty in the country, we had to make some serious decisions on our future here. We were forced to rethink our strategy and decided to stay and adjust," chief executive officer of E-Gas, Azlan Shah Mohamed Shah, told Bernama here Monday.
E-Gas is the third player in the liquefied petroleum gas (LPG) industry after Shell and Laugfs.
There are many Malaysian investments in Sri Lanka with the most successful being Telekom Malaysia Bhd's local subsidiary, Dialog Telekom. Dialog is the biggest mobile phone operator here and the most profitable company on the Colombo bourse.
Azlan said despite the problems the company decided to stay and re-invest in infrastructure and other assets to cut costs to make the investment viable.
E-Gas has been here for the past three years initially with Expolanka, a local company, as the partner.
It has assumed a low profile unlike other bigger players and has been servicing smaller areas through a combination of local marketing techniques and word-of-mouth sans mainstream advertising.
E-Gas was hit when the A-9 Vavuniya-Jaffna road was closed due to the ethnic unrest. The road goes through areas controlled by Tamil separatist rebels.
Azlan said the company's initial investment was 80 million rupees (100 rupees = RM3.25).
It is now raising that to 140 million rupees with plans afoot to spend another 79 million rupees.
Azlan said the company planned to build a new bottling plant at Makandura outside Colombo, to increase the fuel storage capacity and to set up haulage system instead of depending on third-party transporters.
"We decided to invest in infrastructure to reduce costs. Rather than use a third-party supplier for transport," said Azlan.
He said the company faced trying times this year.
"For some time we undecided because of the serious situation in the country. We had to decide either to go for it or don't.
"It is then we decided to stay on and improve the efficiency of the operation through reducing costs," he said.
Azlan said four serious incidents this year badly affected its business.
"They were the port strike, the Customs strike, the petroleum strike and devaluation of rupee which has ruined the cost structure as LPG gas prices are controlled by the state-owned Consumer Affairs Authority (CAA)," he said.
He said the impact of the port strike, coupled with the security situation, was still being felt.
"Some ships are bypassing Colombo. They are avoiding this route and going to Dubai or Mumbai and due to the security risk the freight rates have gone up," he said.
He said the cost of living in the country also affected the company.
"The buying power is going down. People will asked for more salaries which mean the cost of business will go up," he said.
He said the company worked closely with Petroliam Nasional Bhd and the Malaysian Internation Shipping Corporation for freighting.
"One of the problems of the LPG industry here is that there is no transfer pricing and LPG companies, due to the CAA control on pricing, has to take the hit when world market prices rise.
"We did an analysis on the price per cylinder and found that only 6.6 per cent was within our control. The rest is controlled by the world, the government or a third party," he said.
E-Gas has suggested to the CAA to have a more reasonable transfer pricing mechanism to benefit the companies and the consumers.
"With the uncertainty in the country, we had to make some serious decisions on our future here. We were forced to rethink our strategy and decided to stay and adjust," chief executive officer of E-Gas, Azlan Shah Mohamed Shah, told Bernama here Monday.
E-Gas is the third player in the liquefied petroleum gas (LPG) industry after Shell and Laugfs.
There are many Malaysian investments in Sri Lanka with the most successful being Telekom Malaysia Bhd's local subsidiary, Dialog Telekom. Dialog is the biggest mobile phone operator here and the most profitable company on the Colombo bourse.
Azlan said despite the problems the company decided to stay and re-invest in infrastructure and other assets to cut costs to make the investment viable.
E-Gas has been here for the past three years initially with Expolanka, a local company, as the partner.
It has assumed a low profile unlike other bigger players and has been servicing smaller areas through a combination of local marketing techniques and word-of-mouth sans mainstream advertising.
E-Gas was hit when the A-9 Vavuniya-Jaffna road was closed due to the ethnic unrest. The road goes through areas controlled by Tamil separatist rebels.
Azlan said the company's initial investment was 80 million rupees (100 rupees = RM3.25).
It is now raising that to 140 million rupees with plans afoot to spend another 79 million rupees.
Azlan said the company planned to build a new bottling plant at Makandura outside Colombo, to increase the fuel storage capacity and to set up haulage system instead of depending on third-party transporters.
"We decided to invest in infrastructure to reduce costs. Rather than use a third-party supplier for transport," said Azlan.
He said the company faced trying times this year.
"For some time we undecided because of the serious situation in the country. We had to decide either to go for it or don't.
"It is then we decided to stay on and improve the efficiency of the operation through reducing costs," he said.
Azlan said four serious incidents this year badly affected its business.
"They were the port strike, the Customs strike, the petroleum strike and devaluation of rupee which has ruined the cost structure as LPG gas prices are controlled by the state-owned Consumer Affairs Authority (CAA)," he said.
He said the impact of the port strike, coupled with the security situation, was still being felt.
"Some ships are bypassing Colombo. They are avoiding this route and going to Dubai or Mumbai and due to the security risk the freight rates have gone up," he said.
He said the cost of living in the country also affected the company.
"The buying power is going down. People will asked for more salaries which mean the cost of business will go up," he said.
He said the company worked closely with Petroliam Nasional Bhd and the Malaysian Internation Shipping Corporation for freighting.
"One of the problems of the LPG industry here is that there is no transfer pricing and LPG companies, due to the CAA control on pricing, has to take the hit when world market prices rise.
"We did an analysis on the price per cylinder and found that only 6.6 per cent was within our control. The rest is controlled by the world, the government or a third party," he said.
E-Gas has suggested to the CAA to have a more reasonable transfer pricing mechanism to benefit the companies and the consumers.