‘LPG market can grow more with the right strategy support’

Why is the LPG market growing so fast? 

All over the world, LPG (liquefied petroleum gas) is a cleaner alternative fuel that can be called a legislative supported fuel as its adoption and growth mainly depends on proper supportive policies of the state.

To grow as an alternative to the other common fuels, it needs a strategy push.

Unlike many other countries which have subsidy programmes to promote LPG penetration, LPG grew in Bangladesh merely following a prudent and very right decision by the current government not to connect further household kitchens with natural gas pipelines a decade back.

The annual LPG market surpassed a volume of 1.2 million tonnes in six to seven years from 80,000 tonnes.

This was also boosted by the around $3.5 bn investment by private sector entrepreneurs within no time, mostly in the last 5-7 years. No other sector in the country saw such a fast and considerable investment inside Bangladesh. Hence the World LPG Association marked Bangladesh as the fastest growing LPG market of the world recently.

Bashundhara is a market leader in LPG. What is its current situation?

The Bashundhara LP Gas, which pioneered private sector LPG bottling in 1999, contributed to nearly one-third of the total investment to attain a capacity to serve 60-70% of the existing market, while as the market leader it is currently serving nearly one-fourth of the market right now.

The huge investment has been done because of the growth potential. 

Also two dozen more players, including some foreign ones, have invested in the sector and few more to come.

What kind of growth do you foresee? 

As soon as the government stopped new pipeline connections to households, the LPG market grew ten-fifteen folds in a decade.

From the industry, we foresee another ten-fold growth ahead, possibly in a decade.

The answer to the question - to be or not to be - depends on the government, if it wants.

For example, following the recent rationalisation of diesel subsidy and gas shortage, LPG emerged as the cleanest and second cheapest (after coal) fuel to run industrial burners.

If LPG replaces diesel only in industrial boilers and burners, industries would consume around five-million tonnes of LPG a year which may add four times to the demand for LPG.

My proposition excludes any replacement of diesel in automotive, agricultural and power generation.

LPG is considered a clean cooking fuel. What significance does this have in its growth? 

Now, let us come to the most important point — the SDG goal for people's access to clean cooking fuel where Bangladesh improved most. The target is to ensure clean cooking fuel — natural gas, electric cooker, biomass, solar, LPG – for 70% people. The country achieved it for around 20% people till date and LPG is serving 6-7% people following the rapid penetration over the second half of the last decade.

The 6-7% people's market is the over 1.2 million tonnes of annual volume right now and if LPG is prioritised to reach the goal of 70%, it would increase LPG demand by around seven folds.

Replacing diesel in industries and dirty cooking fuels by LPG may see an annual demand for 15 million tonnes in future.

If CNG subsidy is rationalised in the coming days, more vehicles will opt for automotive LPG or auto gas.

The potential to be grabbed for the sake of our environment, energy security is why the industry is seeing so much interest from investors, both local and foreign ones.

What are your thoughts on the policy situation? 

Those who invested are not enjoying satisfactory returns because the market is crowded.

Availing licences from the government, 25 plus investors are competing intensely in the 1.2-million-tonne market, while the 25-million tonne market of India is being served by three players, followed by only four players in the 35-million tonne market of China.

I would say, the government gave the industry too many firms, now it should give them growth opportunities.

It is a business-friendly government's duty to let the industry flourish removing policy hurdles in the growth path, ensuring an improved infrastructure for an efficient supply chain and very importantly, offering them the needed ease of doing business.

LPG is a thin margin-business. On top of that, the industry is heavily subsidising the cylinders in circulation.

The industry wants no subsidy from the government, which is seen in other fuels and in many other LPG markets. But, the industry deserves fair treatment.

Despite being the cleanest non-renewable fuel, LPG has no subsidy and is in an uneven competition with subsidised grid gas.

What do you think should be the role of the regulator? 

We welcome the energy regulator fixing the retail price of per cylinder LPG as per court order. But in recent months, the Bangladesh Energy Regulatory Commission (BERC) is not lending us an ear regarding our soaring costs due to dollar price hike, the increased transportation costs due to diesel price hike.

Bashundhara invested in oceangoing very large gas carriers (VLGC) to bring bulk LPG from Middle-Eastern refineries, we have lighter tankers to get those transferred in off the shore and bring the fuel to the port, and again our own inland water vessels carry those to Dhaka.

If we had a deep-sea port, the VLGC would directly discharge LPG at our port and we could save at least 15% in costs. If the government inspires LPG through waiving some VAT and advance taxes LPG price could be further brought down.

The industry merely needs the opportunity to grow, the private sector would do its job well without subsidy.

This fuel also can help check the national budget deficit, in other ways.