Local operators urge govt to review LPG tariff

Local LPG operators termed the current tariff rate as ‘destructive and discriminatory’ for the industry and called upon the regulator to review the tariff immediately in consultation with the stakeholders.

Addressing a press conference on Tuesday, LPG Operators Association of Bangladesh (LOAB) President Azam Jahangir Chowdhury said Bangladesh Energy Regulatory Commission (BERC) has fixed the tariff without any policy and consultation with the stockholders.

A clean-burning fossil, LPG (Liquefied petroleum gas), is made through processing natural gas and refining crude oil.

Through a public hearing in April, BERC fixed the retail price of a 12.5kg LPG cylinder at Tk 591 for state-run companies and Tk 975 for the private entities based on the monthly adjustment with the Saudi Aramco price.

Asian countries, including Bangladesh, refer to Saudi state-owned Aramco's monthly Contract Price (CP) for setting up LPG price in their respective local markets.

At the press conference, LPG operators said they faced a loss of Tk 224 for each of 12-kg cylinder based on BERC’s six cost components.

The components are: inventory, return of equity and rate of return on date, operational cost, distributor cost including transportation, retailer cost and manufacturing cost of cylinders.

The LOAB President termed the tariff adjustment by BERC as arbitrary for the private companies which holds 98 percent of the market share.

“Some 28 LPG operators have invested Tk 300 billion in last five years, which is almost 7 percent of country’s total gross domestic product. And we hope to take the ratio to 10 percent of GDP in next two years.” Azam J Chowdhury, also chairman at East Coast Group, said.

At this growth stage of the industry, the discriminatory decision from the BERC may stagnant the investment and the growth of the sector, he feared.

“Besides, there is no policy to fix the price of LPG at retail by BERC. So I think the role of BERC may hamper the government’s reputation.”

Industry insiders said BERC moved to fix LPG tariff on the backdrop of Supreme Court directives based on an appeal from a consumer rights group in 2016. The government hardly regulated the LPG retail market since 2009.

Bashundhara LPG head of sales Jakaria Jalal said the LPG industry has been flourishing widely in the last five years.

“BERC has redefined the meaning of MRP through fixing ‘minimum retail price’ which seems unrealistic. When the global market price increases, BERC reduced the tariff. Then the operators have to face losses to continue business. And we kept our supply chain from the ethical point of view as per our business ethics. Many of our retailers were fined across the country due to the illogical price-fixing by the BERC,” he said.

Jakaria further urged the government to formulate a prudent policy for the LPG sector as the operators are struggling to run businesses with complexity in guidelines from 18 regulatory offices, which is a very rare practice in the world.

He said the government should promote green fuel like LPG to attain the seventh targets of SDG which directs every nation to ensure affordable and clean energy by 2030.

BERC is scheduled to host the next hearing on the LPG retail price on June 7.