LPG operators seek ‘business-friendly’ tariff

Liquefied petroleum gas (LPG) operators have apprehended that some small companies in the sector would be forced to close down their business if the energy regulatory commission does not announce a business-friendly tariff.

They said the existing tariff has made most companies concerned, because even the leading operators cannot post more than 1.7% profit.

During a public hearing at the Bangladesh Institute of Administration and Management (BIAM) auditorium in the capital on Monday, members of the LPG Operators Association of Bangladesh (LOAB) asked the authorities to fix a tariff that would protect their business and consumers' rights too.

Representatives of consumers, on the other hand, demanded to lower the retail price of 12kg LPG cylinder to Tk997.68, from the current price of Tk1033.

Professor Dr M Shamsul Alam, energy advisor to the Consumer Association of Bangladesh (CAB), also opposed the LPG operators' proposal, requesting the regulator to reject their proposal of revising the existing tariff.

Bangladesh Energy Regulatory Commission (BERC), the authority to regulate the energy, power and petroleum sector, held the hearing following an appeal placed by 18 LPG operators challenging the retail tariff of LPG announced in April last.

The hearing was chaired and moderated by BERC Chairman Md Abdul Jalil.

He said that the commission will take initiative to set a tariff that will be acceptable and tolerable to both operators and consumers.

At the beginning of the hearing, Shamsul Ahmed, chief executive officer of Omera Petroleum Ltd & Omera Cylinders Ltd; Jakaria Jalal, head of Bashundhara LP Gas Ltd and M Muntasir Alam, chief commercial officer of Beximco LPG presented the association's proposal.

Shamsul Ahmed said that LPG's current market is one million tonnes per year and expected to be more than two million tonnes within 2025.

"It is expected that all the applicable and justifiable cost components are taken into consideration while proposing the MRP. But the very first tariff of BERC does not reflect the true picture of the industry," he added. 

He said the BERC should consider the freight and premium as the variable cost factors along with the raw materials while setting the MRP.

Shamsul Ahmed also suggested the commission not consider the current month's rate as the base for the next month's tariff.

Jakaria Jalal said that they have seen a deficit of Tk224 in the existing tariff of six components of the operating system.

"In the non-variable cost component, we spent Tk506.4 for each 12kg cylinder. But BERC fixed it at Tk282.4 in its order. Therefore, we see a deficit of Tk224 in each cylinder," he added.

He said the small companies will not survive if the regulatory commission continues its existing price model.

At the same time, LOAB representatives demanded that the price of autogas be not changed from month to month.

However, BERC's Technical Evaluation Committee recommended the commission to continue the current model for setting non-variable costs in the tariff and to fix the 12kg LPG cylinder's price at Tk1097.76, based on the CP of September.

It also recommended considering the running month's CP for setting the upcoming tariff.

The technical evaluation committee also suggested setting the autogas price in each month based on the running month's CP rate.

Previously, private operators were at liberty to set the LPG cylinder rates. On 12 April this year, the BERC determined and set the price of LPG cylinders, both in the public and private sectors, for the first time.

Since then, the BREC has been adjusting retail prices of LPG based on the Saudi contract price of propane and butane.

Currently, the country consumes around one lakh tonnes of LPG every month with the usage ranging from cooking to refuelling vehicles.

Some 27 private operators are fulfilling around 98% of the total demand whereas only 2% comes from state-owned LP Company Ltd.