LPG industry in crisis for arbitrary price cuts

Staff Correspondent

11 June, 2021 12:00 AM printer

LPG industry in crisis for arbitrary price cuts

The country’s LPG sector is facing a severe crisis due to the lack of industry-friendly tariff adjustment policy by the regulatory body.

In the latest tariff adjustment, Bangladesh Energy Regulatory Commission (BERC) has further cut the price of Liquefied Petroleum Gas (LPG) in the local market though the price continues to rise in the international market.

In the global market, the price of propane and butane was $495 per tonne and $475 per tonne respectively in May. But in June, propane tariff has jumped to $530 per tonne and butane to $525 per tonne.

However, the BERC re-fixed the retail price of a 12kg cylinder of LPG at Tk 920 in May and further lowered the price to Tk 842 in June.

Energy experts and investors were stunned by the decision of cutting the price of a 12kg cylinder by Tk 78 at a time when the global market sees a rise in LPG price by $45 per tonne.

Any arbitrary price cut at the local market without any consultation with the investors will put the whole sector in jeopardy, they said.

The country’s demand for LPG was 80,000 tonnes in 2013, which has crossed 1.2 million tonnes now. The demand is estimated to be 2.5 million tonnes by 2025 and 3.0 million tonnes by 2030.

Local investment in the LPG sector stands at Tk 320 billion and the sector has created jobs for 1.0 million people. A large portion of the investment is made up of bank loans.

During meetings with BERC and public hearings on tariff adjustment, LPG investors and operators pointed out their costs and challenges. They also presented necessary factors of price adjustment so that the rights of the producers and consumers remain unaffected.

In April this year, BERC for the first time fixed the prices of the autogas used for household and commercial purposes.

The energy regulator unilaterally cut the LPG price without considering the interest of the investors and the people employed in the sector.

Arbitrary decision on the part of the energy regulator is seen as a deep-rooted conspiracy to put the sector’s Tk 320 billion investment in uncertainty.

Like many other countries, Bangladesh is exposed to a shortage of energy. The government has provided 6 per cent of families with piped natural gas for household cooking. The supplied natural gas meets 12 per cent of the total energy consumption.

Against this backdrop, the LPG has created a niche in the market for being available and cost-effective. Apart from household cooking, LPG is being used for commercial and industrial purposes.

The policymakers and consumers prefer LPG due to the gradual decline of natural gas reserve in the country. As LPG is an import-based product.

Last year, the High Court directed the BERC to reset LP gas following a writ petition filed by the Consumers Association of Bangladesh (CAB).

Complying with the apex court order, the energy regulator arranged a public hearing on the issue on January 14 this year. During the hearing, BERC decided to fix the monthly LPG price which is consistent with the price in Saudi Arabia. The energy regulator also proposed to reset the LPG price in a way that protects the rights of both consumers and operators.

But this commitment is being ignored as the international price isn’t bring reflected in the LPG price adjustment.