BERC identifies transportation cost main hurdle to cut LPG price

Observerbd

Bangladesh Energy Regulatory Commission (BERC) has identified that inflated transportation cost is the main barrier to lowering of LPG price in the local market.
A committee headed by BERC member Md Maqbul-E-Elahi Chowdhury has prepared the report after consultations with stakeholders including investors.
“To ensure a unified LPG price at the retail level and reduce sufferings of the commoners, BERC has taken up an initiative to fix the retail price of LPG through a pricing policy like natural gas and electricity as per High Court order, however, it will start tomorrow (January, 14),” Maqbul told the Daily Observer on Tuesday.
In line with a court instruction the public hearing will be held on January 14 to 18 at BIAM auditorium in the city.
“As there is no LPG price monitoring system or existence of energy pricing policy to discuss the issue we need to introduce it here but we have to understand the issue first,” former energy Adviser Dr M Tamim said.
There are two types of      markets (a) free market (b) controlled market, we should not compare our market with India as the LPG market was flourished by the public sector and the [Indian]government has been paying huge subsidy and [put in place] a monitoring system there to ensure minimum control over it, he added.
“As it is a private players market we have to ensure some profit margin for the private sector here, government should track whether they are over pricing it or not and control the quality and safety of this commodity at any cost,” he said.
It is a tough regulation as open market is driven by demand-supply formula, how can one comment on the product cost as it goes up and down every month even within 15 days, he said.
“Self regulation is good enough but we can make a ‘range of cost’ for six or four months as cost is changing at any moment,” Dr Tamim suggested.
Meanwhile, the BERC report said Bangladesh’s LPG market is import-dominated, as more than 95 per cent of total LPG requirement and 60 per cent of LPG cylinders are met through import, however, 26 LPG companies are now dominating the unlimited market of over 1.0 million tonnes of LPG each year.
International price of the fuel including its freights, premium rates, bank interest rates, cylinder costs and different tax measures are not the issues here. The private sector imports LPG through small cargoes having the capacity of around 2,500-5,000 tonnes, however, the price of LPG in West Bengal of India is cheaper by around US$60 per tonne compared to Bangladesh only due to the cost difference of transportation, the report said.
India imports LPG through bulk carriers but Bangladesh imports the fuel through small carriers.
However, the report suggested a subsidy worth 25 per cent on the import price of LPG to the operators to keep the cost of the cooking fuel within the reach of commoners.
It also recommended fixing of a unified local LPG price, which it said to be fixed through public hearing like that of natural gas and electricity price at retail level.
The BERC also recommended import of LPG through bulk cargoes having the capacity of around 20,000 tonnes or above instead of small cargoes.
Meanwhile, LPG Operators Association of Bangladesh, or LOAB, in its proposal to the BERC has sought a 9.0 per cent profit in LPG sales taking into consideration the international price of the fuel including its freight, premium rate, bank interest rate, cylinder cost and different tax measures. They are selling a 12.5 kg cylinder at a rate of Tk 900 to Tk 1,000. The 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.
It also showed that Bangladesh annually consumes about 10 lakh tonnes of LPG and about 98 per cent of it sold in bottles by two dozen private companies and only two per cent is sold by the government.
Approximately 2 million domestic consumers use natural gas mainly for household cooking. The gas utility companies estimate that approximately 7 per cent of the total population of the country gets the privilege of getting piped gas supply for everyday cooking. The rest 93 per cent are using either costlier bottled LPG gas, or kerosene or firewood.
Energy division data showed that around one million tonnes of LPG was consumed by the end of 2018, up from around 250,000 tonnes in 2015.
The volume of LPG consumption was around 400,000 and 650,000 tonnes in 2016 and 2017, respectively, according to stakeholders and market players.

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