BERC announced LPG prices to satisfy private sector investors, CAB advisor says

Energy Advisor of the Consumer Association of Bangladesh (CAB) Prof Dr M Shamsul Alam has alleged that Bangladesh Energy Regulatory Commission (BERC) has fixed the prices of liquefied petroleum gas (LPG) to satisfy private sector investors.

The commissions considered the Saudi Aramco CP price of March 2021to fix the domestic LPG price, which was the highest in the past several years, he said.

“As the public hearing took place in January, 2021, the BERC should have to consider the Saudi Aramco CP price of January when the prices of Propane and Butane were US$550 per tonne and and $530 per tonne respectively. The tariff would have come down significantly as the consequences,” he added.

The commission should not take three long months to give its verdict as the Saudi Aramco CP price is released during the first week of every month, said Mr Alam.

He also was critical over the BERC’s decision to fix new tariff in every month, as what he said, the commission does not have any jurisdiction to change tariff even by a single paisa without holding public hearing.

Like the CAB advisor, market insiders also termed the new LPG tariff as a means to support the bargain-hunting private sector.

“If the commission would consider the Saudi Aramco CP price of April, when the prices of propane and butane was at $560 per tonne and $530 per tonne respectively, the new tariff would have been around 15 per cent lower, said an LPG trader refusing to be quoted.

Propane and Butane are the main ingredients of LPG, which is prepared through mixture of these two components.

New tariff was incomplete and the announcement was made without carrying out necessary homework, alleged an expert in LPG sector businesses Mohammed Saidul Islam.

Despite repeated attempts comments from any private sector LPG operators over the new tariff could not be found.

Earlier on Monday, the BERC fixed the retail prices of LPG for domestic market for the first time considering the Saudi Aramco contract price of March 2021, which was the highest over the several years.

The retail price of 12.5kg LPG to be provided by state-run LP Gas Ltd will be Tk 591, while 12kg LPG to be provided by private operators will be Tk 975, BERC chairman Md Abdul Jalil announced, while delivering the LPG tariff order through an online platform from its office in Dhaka Monday afternoon.

The commission announced the new tariff of LPG after holding public hearing on January 14, 2021 in line with a court instruction.

LPG is being used mostly as cooking fuel and in maximum households 12 kg or 12.5 kg LPG is being provided by the operators through cylinders.

The commission Monday fixed the retail level LPG price by private sector at Tk 81.30 per kilogram (kg) with value added tax (VAT).

Private sector will be able to sell LPG through different sizes of cylinders like 5.5 kg, 12.5kg, 15kg, 16kg, 18kg, 20kg, 22kg, 25kg, 30kg, 35 kg, 45 kg to consumers, the BERC order stated.

Price for LPG to be supplied through reticulated system, or centralised storage system, will be Tk 79.01/kg including VAT.

The auto gas, the LPG used in vehicles, price has been fixed at Tk 47.92 per litre by the commission.

The prices will have immediate effect from Monday (April 12), as per the regulator’s decision.

Until Sunday, the state-run LP Gas Ltd would fix and announce retail level LPG price for its product occasionally, while the private sector's retail LPG price was fixed by the investors themselves without any public announcement.

A12.5kg LPG was being sold by LP Gas Ltd at Tk 600, according to the company statement, until Sunday, while, private sector was selling a 12 kg LPG at different prices across the country within the range from around Tk 980 to Tk 1,100, market sources said.

Auto gas price was Tk 45 per litre, until Sunday, president of LPG Filling Station and Conversion Centre Association Serajul Mawla said.

“The commission has fixed the price of LPG considering the Saudi Aramco contract price (CP) of March 2021 for Propane and Butane, which was US$625 per tonne for Propane and $595 per tonne for Butane, said the BERC top brass.

The price will be adjusted every month based on the price movement of Propane and Butane in the CP, he said.

The commission earlier held a public hearing on January 14 to fix the LPG prices domestically.

Sources said, in the public hearing help January the consumers group sought quality LPG at affordable price, left leaning political leaders demanded a slash, while the operators demanded a hike.

Technical evaluation committee (TEC) of Bangladesh Energy Regulatory Commission (BERC) had recommended fixing of a 12 kg LPG at Tk 866, a 35 Kg LPG cylinder to Tk 2,525 and a 45 Kg LPG cylinder to Tk 3246.

LPG Operators Association of Bangladesh (LOAB) had sought fixing of a 12 Kg LPG cylinder to Tk 1,259, a 35 Kg LPG cylinder to Tk 3,672 and a 45 Kg LPG cylinder to Tk 4721.

Privately owned Promita LPG sought a 12 KG cylinder at Tk 1,024, a 35 Kg LPG cylinder to Tk 2,987 and a 45 Kg LPG cylinder to Tk 3,840.

State-run LP Gas Ltd has sought a 16.66 per cent hike in its LPG price to Tk 700 per 12.5 kg cylinder from existing Tk 600, during the public hearing.

Market insiders said, Bangladesh imports around 95 per cent of its total LPG requirement of from global sources, while a state-owned LP Gas Ltd produces around 20,000 mt of LPG after refining from crude oil and condensate.

Bangladesh usually imports pressurized LPG in coaster-type vessels with a capacity of about 1,800 mt delivered to Mongla port from trading sources such as Singapore, or the nearest deepsea ports where large ships can anchor and break bulk. Its main LPG suppliers include Siam Gas, BB Energy, Vitol Asia and Petredec, an industry source said.

More than 25 LPG companies, of varying sizes and investment, now operate in the Bangladeshi market.

LPG consumption in Bangladesh has risen to around 1.5 million mt/year currently from around 1 million mt in 2018. The country consumed almost 650,000 mt of LPG in 2017, around 400,000 mt in 2016 and 250,000 mt in 2015, government data showed.

LPG consumption by households, commercial units and as auto fuel in vehicles has been growing rapidly since 2016 due to favorable government policy, including duty waivers on the import of LPG and its machinery.

Local and international companies have been spurred to invest in the LPG sector by the government's strategy to popularize LPG consumption instead of piped natural gas amid fast-depleting domestic natural gas reserves.

The government's drive against illegal piped gas connections, especially in households and commercial units, has also helped boost LPG usage in Bangladesh, while consumption growth has led to the rapid rise in LPG operators.

The use of LPG in vehicle is on increase too in Bangladesh due to its cost competitiveness compared to 95 and 92 RON gasoline, said LPG trader Mohammed Saidul Islam.

The LPG business as autogas in Bangladesh kicked off in 2005, when Australia-based Petredec Elpiji set the country?s first filling station, market sources said.

Currently some 400 autogas filling stations are operational across the country, which was less than half a couple of years back, said Filling Station and Conversion Centre Association President Serajul Mawla.

He said the number of auto gas filling stations will be more than double to around 1,000 within next five years.

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