New LPG price does satisfy none  

Shamsul Huq Zahid | Sunday, 18 April 2021

The energy regulator---Bangladesh Energy Regulatory Commission (BERC)---on April 12 last, for the first time, fixed the retail prices of liquefied petroleum gas (LPG) for the domestic market.

What also has been unique about the BERC decision is that LPG would only fuel the price which will be adjusted every month taking into account its international prices.

The government has so far ignored suggestions from the multilateral donors and relevant others on adjusting the prices of fuel oils regularly in line with their international prices.

The LPG price fixation, however, has failed to satisfy either of the parties--- private LPG cylinder marketers and consumers.

LPG marketing companies feel the prices have been fixed without taking into account the market realities while the Consumers Association of Bangladesh (CAB), the consumers' rights organisation, has alleged that the Commission has only protected the interests of the private LPG marketers.

The BERC has fixed the price of a 12kg cylinder marketed by LP Gas Limited, a state entity, at Tk 591. But the price of the same has been fixed at Tk 975 marketed by private companies.

The retail price of a 12 kg cylinder marketed by private LPG companies was between Tk1,100 and Tk 1,150 on the day new prices were announced by the BERC.

The cylinders that are marketed by the state-owned company enjoy a certain amount of subsidy element.  But the company can meet only a tiny portion of the total domestic demand for LPG cylinders. The LPG market is under the control of private companies. They had been enjoying freehand until recently as far as fixation of their LPG cylinder prices is concerned.

It is not that the BERC has fixed the price voluntarily despite the fact that there has been a growing demand from the consumers to do the same. The truth is that the higher court has compelled it to fix the retail price of LPG cylinders.

The reluctance of the BERC to fix LPG prices is very much evident from its foot-dragging on the finalisation of the rules that were drafted as back as 2012. Following a writ petition filed by the CAB on the delay, the High Court has recently ordered to fix LPG prices.

There is no denying that the cost of marketing LPG by the private bottlers is much higher than that of the state-owned LP Gas Limited, which can meet only a small fraction of the market demand. The LP gas markets LPG that is received as a byproduct from the Eastern Refinery at Chittagong and condensate at a gas field at Koilastila in Sylhet. But the private LPG marketers are required to import LPG in bulk from the international market. They have to bear the shipping cost also. 

The LPG cylinders sold by the private bottlers could also be less expensive for the consumers had the government provided subsidy as happens in neighbouring India.

In India, LPG marketers fix the price of their cylinders every month taking into account the international prices of the item and the exchange rate of the Indian Rupee. Consumers are required to buy the fuel at market prices.

The government, however, subsidises 12 cylinders of 14.2 kg for each household annually.  The subsidy amount, which is equivalent to a part of the market price of LPG, goes to the bank account of the consumers directly.

The LPG market has been expanding continuously in Bangladesh. It will continue to do so in the years to come since there is no cheaper alternative.

Since the government stopped giving piped natural gas connection to households, the demand for LPG has been going up relentlessly. This has led to the emergence of new LPG bottlers in the domestic market. Not just consumers in cities and towns, people in rural areas are also becoming accustomed to the use of LPG. It is because firewood is now pricier than LPG which is easily available and involves less hassle in procurement.

Given the important role the LPG is now playing in the lives of millions of consumers across the country and the investments being made by the private operators, the sector deserves increased and organised attention from the policymakers.

The attention of the government and the energy regulator is now mainly concentrated to natural gas and petroleum products.  Only the state entities are involved with their marketing and distribution and it is easy for the government to keep watch on their activities. But the situation is altogether different in the area of LPG marketing where the private operators have been dominating.

So, under the circumstances, making a few rules would not be enough to control and guide an ever-expanding sector like the LPG.  The government should enact a sector-specific law and rules under it, keeping in view the present as well as future developments and interests of all stakeholders, including the consumers. Any piece-meal solution, usually, does more harm than good. The government should employ a task force comprising experts in the relevant field to prepare a policy guideline for it. Once such a guideline is prepared, the government should do the rest in the right earnestness.


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