Dhaka, April 17, 2021 (EP) - Experts at a virtual discussion today (Saturday) warned that fixation of the LPG price would affect the availability of quality product in the local market, while raising concerns about its safety and creating disruptions in market competition.
They suggested that the price should be determined by the market based on a formula to be set by the regulator, Bangladesh Energy Regulatory Commission (BERC).
The concerns and views came at the discussion on “BERC’s LPG Pricing and Its Sustainability”, organized by Energy & Power magazine in collaboration with M2K Technology and Trading and moderated by EP Editor Mollah Amzad Hossain.
Energy Division’s Senior Secretary Anisur Rahman and BERC Member Maqbul E. Elahi Chowdhury graced the program as chief guest and special guest respectively. Engineer Zakaria Jalal, Head of LPG Division at Bashundhara Group, made a presentation on the issue.
The program was told that the BERC will calculate price every month by using the formula taking into account that month’s contract price (CP). If any confusion arises, the BERC and LOAB would decide the appropriate price through discussion.
On the other hand, the ministry of energy stated that the BERC merely acted upon the court’s order. However, if needed, the ministry will assist the BERC in monitoring the LPG sales price at field level.
The panelists at the webinar included former BUET Professor Dr. Ijaz Hossain, Dean of Engineering at BUET, Professor (Dr.) M. Tamim, President of International Business Forum Bangladesh and Energypac CEO Humayun Rashid, EP Contributing Editor Engineer Khondokar Abdus Saleque, energy expert Bashirul Haq, Tanzim Chowdhury of Omera Gas, Engineer Saidul Islam of LPG Bulk Traders and LPG Master Distributor Kazi Kamal Ahmed Babu.
Senior Secretary Anisur Rahman said the Energy Division has a committee working on LPG pricing formula. But due to the CAB’s writ, the court ordered the BERC to fix LPG price and, as a result, the committee stopped working. But had LOAB gone to court to counter CAB’s writ, the verdict may have been different.
He said work is going on to start a one-stop service for the LPG sector. Because it is unacceptable for a LPG operator to take permission from 28 different agencies. He is hopeful that the new rules will be ready within next 6 months and a policy will be in place to have a single regulatory authority to deal with the LPG sector.
The senior secretary further said that there is a tendency of bigger operators to take over the smaller ones. That is why mandatory storage capacity has been raised from 3,000 tonnes to 5,000 tonnes.
He suggested that while the BERC invited various stakeholders to its hearing, it failed to give the same opportunity to representatives of the LPG distributors and dealers. This was needed because at the field level it is they who would play the biggest role in lowering prices. Then BERC’s decision on price that will be implemented in the field will be aided by steps taken by the energy division.
BERC Member Maqbul E Elahi Chowdhury said that the maximum retail price of LPG has been set at Tk 975 taking into consideration the interests of both operators and consumers based on March’s CP (Saudi ARAMCO Contract Price).
The cost of LPG, transportation cost, operator, distributor, dealer prices, local transportation costs were all considered before deciding this price. For successive months, price would be adjusted taking only the CP price into consideration.
But the BERC did take into consideration all costs, perhaps in LOAB’s eyes, they were not high enough. But it should be remembered that while it is BERC’s prerogative to fix the price, implementation will be done by the government’s concerned department.
Mr. Elahi stressed on the issue that the BERC was in favor of giving 25% subsidy on LPG price to make it attractive to lower-income groups. But this initiative wasn’t supported either by the CAB or LOAB.
Engr. Zakaria said around 3 million people are engaged in the LPG sector where Tk 32,000 crore has been invested. Despite being a small market, too many operators are present vying for market share at subsidized price.
Hence, the imported LPG worth Tk2,500 or cylinders made costing Tk 1,800 is being retailed at Tk 800-850. While fixing the price is a good initiative, the BERC-fixed price does not fully reflect cost of fund, dealers’ and distributors’ commission, transportation costs. Consequently, the operators will gradually lose out in face of the fierce competition.
Prof. M. Tamim stated that the regulator can give price formula for a product in the market. Whether operators are following that formula can be monitored. But fixing the price is tantamount to taking hostage the operators. It will hamper the supply of quality products in a safe environment to the market.
Professor Ijaz Hossain said that it is not the operator but distributors and retailers who have the option to play with the prices. Hence it will be next to impossible to revise price every month and manage it. If dealers have in stock LPG bought at higher price from previous month, that will create another crisis. Rather, the BERC needs to put a cap on LPG price. I do not think the consumers will have any problem paying more than Tk100 per cylinder if it is a better quality product.
Mr. Humayun Rashid opined that competition should decide price in a free market. The BERC should keep in mind that unrealistic profit-making and monopolistic malpractices do not happen. The sector as a whole will suffer if the price is fixed at which the operators are forced to sell.