Another round of LPG price hike likely

Industry charges being reviewed despite failure to enforce rates

LPG consumers can brace for another round of price hike as the Bangladesh Energy Regulatory Commission (BERC) kickstarts a process for revising the rates and charges tomorrow.

The commission will hold a public hearing, its first since introducing the monthly LPG price-fixing mechanism in April 2021.

The hearing, which comes after industry players asked for increasing their charges, is taking place at a time when consumers are paying more than the commission-fixed price for more than a month now, according to market participants and consumers interviewed by The Daily Star.

When the BERC rate was Tk 1,585, consumers paid Tk 2,500 for the 12kg cylinder amid a supply crunch. Then on October 4, the BERC raised the price to Tk 1,837, but the retail prices remained above Tk 2,200.

Subsequently, more than one crore LPG users continue to pay between Tk 2,200 and Tk 2,400 for a cylinder, The Daily Star learnt from discussions with at least 10 consumers, six retailers, two distributors and two importers.

Under the announced pricing structure, distributors are supposed to receive a 12kg cylinder from importers and bottlers at Tk 1,752. With a distribution charge of Tk 50 per cylinder, distributors are supposed to sell it to retailers at Tk 1,802.

The prescribed retail charge is Tk 45 per 12kg cylinder, which brings the final price to Tk 1,847.

In contrast, The Daily Star found that distributors are paying more than Tk 1,850 per cylinder and charging retailers substantially more than the prescribed distribution charge, resulting in retailers paying at least Tk 2,100 per cylinder.

Against the fixed retail charge of Tk 45 per cylinder, retailers are charging an additional Tk 200-300, pushing the price further above the official rate.

Amid this backdrop, four distributors from Dhaka, Cumilla, Chattogram and Gazipur on October 13 applied to the BERC for an increase in distribution and retail charges as fuel costs, licence fees and other expenses increased.

All four sought an increase in the distribution charge from Tk 50 to Tk 150 per cylinder and the retail charge from Tk 45 to Tk 70.

The applications, which had similar wording, said that importers and bottling companies were adjusting their prices more than once a month bypassing the rates fixed by BERC.

The distribution charge fixed by the BERC is insufficient to cover operating costs, said an LPG distributor in the Tejgaon area.

Companies did not deliver cylinders to distributors’ warehouses as per the BERC rules, forcing distributors to arrange their own transport.

“Some companies supply LPG cylinders at Tk 1,742 each, but we have to spend another Tk 40-50 per cylinder to bring them to our warehouses. We often have to wait two to three days to collect the cylinders.”

Loading, unloading, labour, transport and other operating expenses further increased costs, leaving distributors unable to operate profitably within the prescribed charges, he said.

According to the distributor, companies including Omera, BM, Total and Aygaz are supplying cylinders at the fixed rate, while the others are charging between Tk 2,000 and Tk 2,080.

The wider market is influenced by the rates charged by some major suppliers, he said, while acknowledging that distributors were charging high prices.

Distributors have stopped providing receipts for months, said a retailer in the Moghbazar area.

“If we ask for a receipt, they tell us they will stop our supply. We have to collect a cylinder from them at Tk 2,100 or Tk 2,200. How can we sell it at the official rate?” he said.

LPG importers have also sought an increase in storage and bottling charges to Tk 25 per kilogram from Tk 16.74, citing higher financing costs for working capital and project loans, as well as expenses related to compliance with safety standards.

In its proposal, the LPG Operators Association of Bangladesh said that operators, distributors and retailers respected the BERC-announced prices but cannot always comply because the rates are not adjusted quickly enough to reflect changing market conditions.

Several LPG companies have created an artificial shortage by stockpiling cylinders, said M Shamsul Alam, energy adviser to the Consumers Association of Bangladesh.

“Consumers are being held hostage in a market dominated by profiteering, while BERC remains inactive. Now another public hearing is being held to increase prices.”

He called for a judicial investigation to identify and punish those involved in stockpiling. The licences of companies found responsible should be cancelled, he said.

The private sector accounts for around 99 percent of the country’s LPG market.