Domestic consumption of LPG

Opens up new horizon

The recent price hike of pipeline gas in homes and the government’s policy of turning all domestic customers towards using liquefied petroleum gas (LPG) have created opportunities for the country’s LPG market to make an exponential leap.

However, a high price differential with pipeline gas and the lack of price adjustment of local LPG in accordance with the recent dip in international market prices have put up hindrances in making the gas cylinder the consumer’s first preference.
Experts said the issue of reducing LPG costs, either by reducing duties and taxes and bottle imports or by applying subsidies on cooking gas (LPG), for ensuring justice to consumers, never became a priority for policymakers.

The current market
The LPG price has dropped by more than 50 per cent in the international market in the last three years due to weak demand and rising output, but it has brought no benefit for the local market. The price of per metric tonne of LPG was USD 1,400 in December 2013, but it has dropped to USD 590 now. If the domestic price was adjusted in line with the international price, then the price of a 12-kg cylinder should have been between Tk. 700–850.
But in the absence of any market monitoring and control by the government, LPG importers and dealers in the country are still charging the consumers high prices.
“I spend around Tk 3,000 for LPG per month as I need two cylinders. For a 12-kg cylinder, I pay around Tk 1,250 to Tk 1,400,” said Assalatuzzaman Rony, a resident of Uttara, pointing out that even after the recent price hike, the domestic gas users who got gas through pipeline need to pay Tk. 650 for a double burner oven.
“It’s hard for a middle income family like ours to spend so much money on monthly gas usage,” he added.
LP Gas Limited, a subsidiary of the state-Bangladesh Petroleum Corporation (BPC), was supposed to sell cylinders at the government-fixed rate of Tk. 700, but consumers alleged that they hardly see the company’s cylinders in the market. Interestingly, armed forces, police and some government agencies still get the Tk. 700 cylinder.
Besides LP Gas Limited, six other private companies—Bashundhara LP Gas Ltd, Jamuna Spacetech Joint Venture Ltd, TOTALGAZ Bangladesh, Petredec LPG Ltd, BM Energy Ltd, and Omera Petroleum Ltd—import and supply LPG in the domestic market at present.
Two other companies—Super Gas (TK Gas) and Bin Habib Bangladesh Ltd—buy LPG from the importers and sell those in the domestic market after bottling them in their own plants. Besides, four other companies—Shena Kollyan Songstha, Orion, Navana and Index—too are entering the market. 

Policy changes needed
Mohammed Saidul Islam, general manager of Petrodec LPG Ltd, said most private companies were not utilising half of their capacity. They could have doubled the supply of LPG cylinders in the market.
Many people in the country still use alternative fuels like kerosene, firewood and even electricity. Sometimes, using them incurs more cost than LPG. “Such people could have used LPG if proper policy initiative was taken at the government level,” said Saidul Islam, adding that the price of LPG cylinders also could be controlled if all the companies were brought under a single umbrella.
During public hearings on gas price hike, Monowar Islam, chairman of the Bangladesh Energy Regulatory Commission (BERC), said that if they increase the gas prices it will help in the use of the excess revenue collected from household consumers to subsidise LPG cylinders.
Interestingly, India, too, faced a similar problem in price differences between pipeline gas and LPG. However, it has devised a way out to give the subsidy to the targeted consumers. Now a cooking gas consumer gets INR 435 directly in his/her bank account when he/she books for an LPG cylinder. But the consumer has to buy the gas at the market price.
Monowar said the BERC might take necessary regulatory steps if the authorities concerned or any of the stakeholders requested it to rationalise the price.
At the recently concluded Fourth Asia LPG Summit held in Bangladesh, the state minister for power, energy and mineral resources, Nasrul Hamid, said the government will design a mechanism to set LPG prices in line with the global market in order to control overpricing.
“We want to focus on three issues: developing a mechanism to control overpricing in the market, ensuring the safety of cylinders and setting up a regulator,” Hamid said, adding that an LPG policy will be introduced within one or two months.
LPG will be supplied at affordable rates in 70 per cent of the areas of Bangladesh in the next three years as the government targets to increase its use in households. Its consumption in automobiles and other areas will also go up as the fuel is cheaper compared to diesel.
Hamid said LPG price was high in Bangladesh because the country did not have a deep-sea terminal. “If we can bring big ships to the port, the cost will go down by about 30 per cent,” he said.
 
New policy to help
With the provision for imports and exports, the government has enacted an Act for establishing LPG bottling plants under both public and private initiatives. Before this Act, there was only provision for LPG imports.
As per the recent Act, no person or organisation could import, export, establish, bottle, distribute or market any LPG without government permission.
Considering the limited energy resources and the development of the country, the Act termed LPG as one of the most promising sources of energy.
Under the circumstances, the government in principle has taken the decision to establish the LPG bottling plant to increase the usage of cylindered gas in automobiles, small industries and as raw materials for chemical and processing industries. 
The government has also enacted the LPG Bottling Act, 2016 to safeguard the country’s dwindling energy resources as well as to ensure a competitive market scenario. 
Under the Act, the government can cancel the licence of any LPG plant or company if it violates the rules and regulations.

 

Domestic consumption of LPG

Opens up new horizon

The recent price hike of pipeline gas in homes and the governments policy of turning all domestic customers towards using liquefied petroleum gas (LPG) have created opportunities for the countrys LPG market to make an exponential leap. However, a high price differential with pipeline gas and the lack of price adjustment of local LPG in accordance with the recent dip in international market prices have put up hindrances in making the gas cylinder the consumers first preference. Experts said the issue of reducing LPG costs, either by reducing duties and taxes and bottle imports or by applying subsidies on cooking gas (LPG), for ensuring justice to consumers, never became a priority for policymakers. The current market The LPG price has dropped by more than 50 per cent in the international market in the last three years due to weak demand and rising output, but it has brought no benefit for the local market. The price of per metric tonne of LPG was USD 1,400 in December 2013, but it has dropped to USD 590 now. If the domestic price was adjusted in line with the international price, then the price of a 12-kg cylinder should have been between Tk. 700850. But in the absence of any market monitoring and control by the government, LPG importers and dealers in the country are still charging the consumers high prices. I spend around Tk 3,000 for LPG per month as I need two cylinders. For a 12-kg cylinder, I pay around Tk 1,250 to Tk 1,400, said Assalatuzzaman Rony, a resident of Uttara, pointing out that even after the recent price hike, the domestic gas users who got gas through pipeline need to pay Tk. 650 for a double burner oven. Its hard for a middle income family like ours to spend so much money on monthly gas usage, he added. LP Gas Limited, a subsidiary of the state-Bangladesh Petroleum Corporation (BPC), was supposed to sell cylinders at the government-fixed rate of Tk. 700, but consumers alleged that they hardly see the companys cylinders in the market. Interestingly, armed forces, police and some government agencies still get the Tk. 700 cylinder. Besides LP Gas Limited, six other private companiesBashundhara LP Gas Ltd, Jamuna Spacetech Joint Venture Ltd, TOTALGAZ Bangladesh, Petredec LPG Ltd, BM Energy Ltd, and Omera Petroleum Ltdimport and supply LPG in the domestic market at present. Two other companiesSuper Gas (TK Gas) and Bin Habib Bangladesh Ltdbuy LPG from the importers and sell those in the domestic market after bottling them in their own plants. Besides, four other companiesShena Kollyan Songstha, Orion, Navana and Indextoo are entering the market. Policy changes needed Mohammed Saidul Islam, general manager of Petrodec LPG Ltd, said most private companies were not utilising half of their capacity. They could have doubled the supply of LPG cylinders in the market. Many people in the country still use alternative fuels like kerosene, firewood and even electricity. Sometimes, using them incurs more cost than LPG. Such people could have used LPG if proper policy initiative was taken at the government level, said Saidul Islam, adding that the price of LPG cylinders also could be controlled if all the companies were brought under a single umbrella. During public hearings on gas price hike, Monowar Islam, chairman of the Bangladesh Energy Regulatory Commission (BERC), said that if they increase the gas prices it will help in the use of the excess revenue collected from household consumers to subsidise LPG cylinders. Interestingly, India, too, faced a similar problem in price differences between pipeline gas and LPG. However, it has devised a way out to give the subsidy to the targeted consumers. Now a cooking gas consumer gets INR 435 directly in his/her bank account when he/she books for an LPG cylinder. But the consumer has to buy the gas at the market price. Monowar said the BERC might take necessary regulatory steps if the authorities concerned or any of the stakeholders requested it to rationalise the price. At the recently concluded Fourth Asia LPG Summit held in Bangladesh, the state minister for power, energy and mineral resources, Nasrul Hamid, said the government will design a mechanism to set LPG prices in line with the global market in order to control overpricing. We want to focus on three issues: developing a mechanism to control overpricing in the market, ensuring the safety of cylinders and setting up a regulator, Hamid said, adding that an LPG policy will be introduced within one or two months. LPG will be supplied at affordable rates in 70 per cent of the areas of Bangladesh in the next three years as the government targets to increase its use in households. Its consumption in automobiles and other areas will also go up as the fuel is cheaper compared to diesel. Hamid said LPG price was high in Bangladesh because the country did not have a deep-sea terminal. If we can bring big ships to the port, the cost will go down by about 30 per cent, he said. New policy to help With the provision for imports and exports, the government has enacted an Act for establishing LPG bottling plants under both public and private initiatives. Before this Act, there was only provision for LPG imports. As per the recent Act, no person or organisation could import, export, establish, bottle, distribute or market any LPG without government permission. Considering the limited energy resources and the development of the country, the Act termed LPG as one of the most promising sources of energy. Under the circumstances, the government in principle has taken the decision to establish the LPG bottling plant to increase the usage of cylindered gas in automobiles, small industries and as raw materials for chemical and processing industries. The government has also enacted the LPG Bottling Act, 2016 to safeguard the countrys dwindling energy resources as well as to ensure a competitive market scenario. Under the Act, the government can cancel the licence of any LPG plant or company if it violates the rules and regulations.