The Financial Express

Expectations for uniform LPG price

| Updated: October 16, 2020 21:24:43

Expectations for uniform LPG price

Bangladesh Energy Regulatory Commission (BERC) has been taking initiatives for fixing the price of Liquefied Petroleum Gas (LPG)  at the consumer level. As published reports suggest, BERC will fix the LPG price every three months. There are suggestions to review LPG price every month and fix the rate. If the initiative yields result, there will be a uniform price for LPG and the price list will be circulated for execution all over the country. Also, LPG cylinder price will be fixed once a year. The popular cooking gas price (12.5 kg cylinder) in the country varies currently within the range of BDT 750-850 depending on the products of the marketing companies and places of marketing.

LPG price, so far, is not regulated and dependent on the international market price, transportation and distribution costs, profit of the marketing companies and their dealers. The Bangladesh Petroleum Corporation (BPC) has been producing annually approximately 20,000 tones of LP Gas and marketing them since 1978. BPC LPG cylinders (12.5 kg) are sold at BDT 600 each.  Energy and Mineral Resources Division sources estimate that the country has 713,000 tones of LPG demand this year. Hence, BPC supply plays little role in the market for influencing price.

LPG (a mixture of propane and butane gas) is supplied in liquid form under pressure in cylinders. A highly flammable byproduct of petroleum refinery, LPG has become popular as cooking gas and approximately 4 million consumers use the fuel in the country. Published report suggests that 46.5 per ent of urban households in Bangladesh has access to cooking gas (either the LPG or pipe gas). On the contrary, 5.8 per cent households have such facilities in the rural areas. LPG demands have been growing as it is an environment friendly and convenient fuel for cooking. Also, the demand for LPG has started growing once government has decided not to provide pipe gas supply to domestic consumers since 2008. Despite the growing demands and availability of bigger consumer market in the country, price of the commodity at retail level remains costlier than it is in neighbouring India. The LPG consumers voice their resentment over price differences between BPC supplied LP gas and the same product supplied by different private companies. Market observers believe that the absence of uniform pricing policy and lack of market monitoring have allowed the LPG price to shoot up. The LPG marketing company executives claim that import constrains and increased cost of transportation of LPG due to absence of deep sea ports and adequate transportation infrastructures in Bangladesh should be blamed for higher cost of LPG at retail level. Mongla port (the usual import port for LPG in Bangladesh) can accommodate maximum 30,000 tonne LPG vessel but the private companies import the product separately with smaller vessels considering the company requirement, storage facilities of the company and their conveniences to import LPG as a bulk product.  BERC sources suggest that the cost of transportation of LPG in Bangladesh (from the import sources) is almost double compared to the cost in India.

Bangladesh government has allowed 58 companies to import and market LP Gas in the country. But there are less than 30 companies active in the business. Also, the retail dealers dominate the LPG selling price at the consumer end. Sometimes, the retailers take advantage of supply interruptions even for a short while and charge higher prices for the important commodity. On the other hand, LPG importers and marketing companies complain multiple charges and fees involved in the LPG business. Also, LPG business companies have to obtain permissions for operations from various authorities including BERC, Energy and Mineral Resources Division and BPC. The LPG Association leaders welcome BERC initiative for price fixing for LPG at the consumer level. At the same time, they want BERC to address the internal conflicts of authority over fixing LPG price with BPC. The LPG marketing company representatives advocate for a compact policy in consideration of the opinions and interests of the regulatory agencies, government and private companies to engage in LPG marketing and distribution business.

The price of LPG varies in the country simply because they are the products of different marketing companies. Observers find the situation has some similarities in terms of pipe gas prices in the country. Domestic pipe gas consumers who have prepaid meters pay the natural gas price at a rate of Taka 12.60 per cubic meter of gas. On an average, a moderate size family consumes 30-40 cubic meters of gas for cooking for a month paying Taka 380-450/per month. On the contrary, domestic consumers who do not have prepaid meter connection pay Taka 975 for a double gas burner connection. That implies that the consumer (without having prepaid gas meter) pay per month for 77 cubic meters of natural gas for cooking (irrespective of the volume of gas the family consumes). Installation of prepaid meters will not only reduce gas consumption at the consumers' levels but can minimise wastes of gas and theft of national wealth. BERC documents also state that introducing prepaid meters for domestic consumers will help the economy save on an average 33 cubic meters of gas per month or approximately 53 Billion cubic feet per annum. Unfortunately, gas distribution companies are less enthusiastic in installation of prepaid meters for gas supply for domestic consumers. Published information suggests that only 300,000 domestic consumers in Dhaka and Chattogram have prepaid gas meter connections while there are 4.3 million domestic consumers in the country for the gas companies.

While LPG has been marketed using retail distribution networks at the filed levels, safe storage and carrying of LPG cylinders has become an issue. Also, the quality monitoring of the LPG cylinders have been raising growing concern in the country. There are a number of recorded deadly accidents from LPG cylinder exposures to fire at different parts of the country. Therefore, Energy and Mineral Resources Division has been considering to involve local administration authorities to monitor the LPG cylinder storage facilities at the dealers' end.  While formulating the LPG gas pricing, safety of storage and transportation issues at the retail level needs to be taken into consideration.

Mushfiqur Rahman is a mining engineer and writes on energy and environment issues.


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