LPG firms look for price hike

All liquefied petroleum gas (LPG) operators, including the state-owned LP Gas Limited, have proposed hiking prices of bottled gas by 10-11% when the government has taken a move to streamline the pricing of the product.

If their proposal is considered by the government, then consumers will be paying a premium over the already high price of this cooking essential.

Earlier, a High Court directive came to rationalise LPG prices in the wake of a writ filed by the Consumers Association of Bangladesh (CAB), demanding that consumers' rights be protected by making LPG cylinders available at reasonable prices.

The CAB went to the court as LPG prices are being fixed by private companies instead of the Bangladesh Energy Regulatory Commission (Berc). The private companies overcharge through undisciplined pricing. That is why Berc should play its role by reining in the prices, according to the CAB.

Last month, LPG prices were hiked again by the bottled gas companies citing an increase in prices of raw materials on the global market.

Terming this price increase irrational, Professor Dr Shamsul Alam, energy adviser to the CAB, said, "The LPG companies cannot do it as the issue is now under the High Court's jurisdiction."

However, the LPG operators claimed that they are still selling LPG bottles at prices lower than their profit margins to survive in an unhealthy competition in the market.

Currently, there are 25 LPG operators in the market with a capacity to provide around 2 million tonnes of LPG annually. In the last one decade, the sector has witnessed an investment amounting to around $1.17 billion, which eventually turned out to be too much, making survival difficult for investors.

On 15 December, Berc received the price hike proposals from the LPG operators and it has decided to hold a public hearing covering 14, 17 and 18 January for fixing the prices.

However, there is a concern whether the prices will be fixed for a definite time or will it be adjusted every month.

Md Maqbul-E-Elahi Chowdhury, member (Gas) at Berc, told The Business Standard that they are going to introduce a method to fix prices.

"We have just got the proposals. The pricing method will be fixed based on the hearing," he added.

Berc received three proposals: One from the LPG Operators Association of Bangladesh (LOAB), the second one from the Bangladesh Petroleum Corporation's (BPC) LP Gas Limited, and the last one from Promita LPG.

The LOAB, a national platform of the private LPG operators, urged the regulatory body to increase the LPG price by 10-11% on an average from the existing retail price.

It also submitted a formula for including the companies' operating costs, import charges and all kinds of taxes in the pricing.

LOAB representatives said following the formula, the contract price of Butane and Propane – raw materials of LPG – will be adjusted with the changes on the international market.

Sources at the Energy Division told TBS that the operators have proposed a price rate that will assure them profit in all seasons.

They have already adjusted the energy prices following changes on the international market. In spite of that, the proposal with a 10% price hike is irrational, they said.

On the other hand, the LP Gas Limited, a subsidiary of the BPC, submitted a separate proposal, seeking to increase the price of 12.5 kg cylinder to Tk700 from the existing Tk600.

BPC's LPG price is lower than what private operators charge as it collects raw materials from local gas fields and Eastern Refinery, the state-owned lone refining facility located in Chattogram.

But consumers hardly get their hands on BPC's LPG cylinder as its annual capacity is only 15,500 tonnes of LPG against the country's annual demand of 1 million tonnes.