Businesses eye bonanza as govt waives 15 per cent VAT on LPG cylinder import

| Updated: October 22, 2017 18:46:41

Photo collected from internet has been used for representational purpose only. Photo collected from internet has been used for representational purpose only.

The government has waived the 15 per cent value-added tax (VAT) on LPG-cylinder import, prompting businesspeople to eye a boost in consumption and business of the gas.

Through a recent notification the National Board of Revenue (NBR) scrapped the VAT on the import of liquefied petroleum gas (LPG) cylinders with immediate effect.

"We are expecting a significant growth in LPG business as the government has waived the VAT on the import of LPG cylinders," Director and Chief Executive Officer (CEO) of privately owned LPG- distribution-company Laugfs Gas Bangladesh told the FE Thursday.

He said cost of import of LPG cylinder will drop as a result, which in turn will help distributors sell the gas to consumers at lower prices.

A 12kg LPG cylinder will cost Tk 250 (US$3.12) less due to the VAT waiver, he added.

Bangladesh's LPG market is import-dominated as more than 60 per cent of cylinders and 90 per cent LPG of the country's total requirement are met with imports, Mr Islam said.

The country currently rolls with around 10 million pieces of 12-kg cylinders on the domestic market, which is increasing by around 16-18 per cent annually, he added.

Bangladeshi consumers mostly use 12-kg LPG cylinders as it is suitable for carrying and transportation, said Islam.

Demand for LPG in the country has seen a strong growth since 2016 due to a prolonged suspension of piped natural gas connections and growth in the use of LPG as an auto fuel.

Bangladesh's LPG demand in 2016 was around 400,000 tonnes, up 33 per cent from 300,000 tonnes a year earlier, and the government forecasts consumption to increase further to 500,000 tonnes in 2017.

State-owned LP Gas Ltd., a subsidiary of Bangladesh Petroleum Corp., produces only 20,000 tonnes per year.

More than half a dozen private companies import a combined volume of 480,000 tonnes per year. The private importers include BM Energy, Laugfs Gas,Omera Petroleum, Totalgaz, Bashundhara, Jamuna Spacetech, and Linde.

A double hike in piped natural gas prices over the past several months -one from March 1 and another from June 1 -- paved the way for consolidating LPG business in Bangladesh.

Currently, the LPG sector is enjoying a favorable tax measure as the government earlier waived supplementary duties and knocked down advance import tax (AIT) to only 2.0 per cent.

Officials said an average hike of 22.70 per cent in natural gas prices for all types of consumers in two phases is helping further growth in LPG business in Bangladesh.

The liquefied-gas consumption in household is having a significant edge as a consequence as the tariffs increased to Tk 750 per single-burner gas stove per month from Tk 600 and to Tk 800 from Tk 650 for a double-burner one.

"With the double hikes LPG consumption in households has become competitive," said Chief Executive Officer of BM Energy (BD) Ltd Mohammed Nurul Alam.

Earlier, people used to feel shy of using LPG in households due to huge gap in prices.

Currently, the price of a 12-kg cylinder of LPG ranges between Tk 700 and Tk 1,000 in local markets, which is almost similar to the price of piped gas at households, he added.

To ensure safety and security over the use of LPG, the government as well as market players are exercising extra caution, he added.

Piped gas connections to households have remained stalled across the country since July 2010.

State-owned Petrobangla currently supplies around 10 per cent of its total production of 2,700 million cubic feet per day (mmcfd) of natural gas to households through pipes.

Demand for LPG in Bangladesh's automotive sector has also seen further growth recently due to growing competitiveness of the fuel compared to CNG and gasoline.

LPG, also known as auto-gas, is not cheaper than CNG despite the March 1 and June 1 hikes, but people are increasingly interested in running their vehicles on LPG to keep their engines safe and protected, said sources.

LPG now sells at Tk 50 per litre on the domestic market, which is an attractive price for customers buying CNG at Tk 40 per cubic metre.

The domestic diesel price is Tk 65 per litre, while petrol and octane prices are Tk 86 per and Tk 89 per litre respectively.

To popularize the use of LPG in automotives, Bangladesh has already issued a licence to BM Energy, a joint-venture private company of the Netherlands and Bangladesh, to install 400 LPG- filling stations across the country.

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