'LPG pricing needs to reflect market dynamics'

Use of LPG has been expanding at a fast pace in Bangladesh, primarily because of its easy availability and short supply of natural gas. The growth of LPG industry, however, has not been without pains. Operators in this industry are still facing a lot of roadblocks. Captain Mainul Ahsan, Executive Director, Smart Group, in a conversion with the Financial Express (FE) recently focused and problems of and prospects of the LPG industry and suggested actions needs to be taken to help its smooth growth. Excerpts follow:
Question (Q): LPG business has witnessed a phenomenal rise in recent years. What are the factors, you think, have contributed to this growth?
Answer (A): As an alternative to traditional fuels like wood and kerosene, LPG has gained popularity due to its cleanliness and efficiency. Many households and businesses have shifted to LPG for cooking and heating purposes. Overall, a combination of government policies, infrastructure development, environmental awareness, and changing consumer preferences has contributed to the growth of the LPG industry in Bangladesh.
Q: The rise in demand for LPG naturally has wooed many companies in LPG business. Many tend to feel that the number of operators is more than what the market needs. What is your opinion?
A: The presence of many competitors in the LPG (Liquefied Petroleum Gas) industry in Bangladesh can have both positive and negative implications. Competition in the LPG industry can lead to several positive outcomes for consumers, such as innovation and competitive pricing; it also presents challenges, including the risk of price wars, compromising on quality and safety, and market fragmentation. It's essential for both companies and regulatory authorities to strike a balance that ensures healthy competition while safeguarding consumer interests and industry sustainability.
Q: Do you think that the government has been offering necessary policy supports to the LPG business?
A: The government of Bangladesh has taken various policy measures to support the LPG business in the country. The government has reduced import duties on LPG cylinders and equipment to make them more affordable, encouraging investment in the LPG sector. The government has actively promoted LPG as a clean and environmentally friendly energy source, encouraging households and industries to switch to LPG from traditional fuels. In some cases, the government has implemented subsidy programs to make LPG more affordable for low-income households, making it a more accessible energy source. The government has implemented safety regulations and standards for the handling, storage, and distribution of LPG to ensure the safety of consumers and the industry. However, it's important to note that government policies can evolve over time, and new policies may have been introduced since then. It's important to check the latest government policies and regulations to get a more up-to-date assessment of the government's support for the LPG business in Bangladesh. Government policies can change over time in response to evolving economic, environmental, and energy security considerations.
Q: Consumers' allegation is that they are compelled to buy LPG cylinders at prices higher than the Bangladesh Energy Regulatory Commission (BERC) fixes every month. Is the allegation true? If yes, what is/ are reasons?
A: It is not uncommon for consumers in Bangladesh to allege that they were compelled to buy LPG cylinders at prices higher than those set by the Bangladesh Energy Regulatory Commission (BERC). These allegations often revolved around several reasons. LPG prices can be influenced by various market dynamics, including fluctuations in global oil prices, supply and demand imbalances, and changes in the cost of production and distribution. If market prices rise, consumers may be charged higher rates by suppliers. The cost of distributing LPG cylinders, especially to remote or rural areas, can be higher than what BERC sets as the standard price. This can lead to higher prices for consumers in those areas. Fuel prices, transportation costs, and logistics expenses can vary, affecting the final price of LPG cylinders. Any increase in transportation costs can lead to higher consumer prices. Changes in taxes and import duties imposed by the government can impact the cost structure of LPG, and suppliers may pass these costs onto consumers. To address these issues and ensure that consumers are not compelled to pay prices higher than those fixed by BERC, it's essential for regulatory authorities to actively monitor the LPG market, enforce pricing regulations, and act against suppliers or distributors found in violation of pricing guidelines. Additionally, enhancing transparency and competition in the market can help keep prices in check and ensure that consumers have access to affordable and safe LPG.
Q: Are the storage and transportation facilities for LPG enough?
A: The storage and transportation facilities for LPG in Bangladesh had been expanding to meet the growing demand for this energy source. However, the adequacy of these facilities can vary depending on factors such as geographic location, population density, and economic development. It's important to note that the situation with LPG storage and transportation facilities can change over time due to evolving demand and government policies. Therefore, it's advisable to check for the latest updates and reports from relevant authorities and industry sources to assess the current status of LPG infrastructure in Bangladesh. Efficient and reliable storage and transportation infrastructure is crucial for ensuring a stable and affordable supply of LPG to consumers, promoting safety, and supporting the continued growth of the LPG industry.
Q: How do you evaluate the role of BERC in marketing of LPG locally?
A: The Bangladesh Energy Regulatory Commission (BERC) plays a significant role in regulating and overseeing various aspects of the LPG (Liquefied Petroleum Gas) market in Bangladesh. BERC's role extends beyond regulation; it also promotes the use of LPG as a cleaner and more environmentally friendly energy source. This aligns with broader energy and environmental goals and encourages the adoption of LPG in households, industries, and the transportation sector. BERC plays a crucial role in regulating, overseeing, and promoting the LPG market in Bangladesh. Its efforts are aimed at ensuring that LPG is a safe, accessible, and affordable energy source for consumers while also supporting the growth and development of the LPG industry in the country. It's important to note that the role and effectiveness of regulatory bodies like BERC can evolve over time as they respond to changing market dynamics and consumer needs.
Q: Safety issue is of great importance in LPG trade and use. How are safety standards maintained in Bangladesh?
A: Safety standards in the LPG sector and use in Bangladesh are maintained through a combination of regulatory oversight, industry best practices, and public awareness campaigns. Safety in the LPG industry is of paramount importance, given the potential risks associated with the handling and use of this highly flammable gas. By implementing and enforcing safety standards, conducting regular inspections, and promoting public awareness, Bangladesh aims to ensure the safe trade and use of LPG across the country. Consumers are encouraged to be aware of safety guidelines and report any safety concerns to the relevant authorities.
Q: What are your suggestions to make the LPG trade smooth and profitable in the country?
A: To make LPG business smooth and profitable in Bangladesh, several strategies and considerations can be implemented. Continue to invest in expanding storage, bottling, and distribution facilities to ensure adequate supply and accessibility across urban and rural areas. Focus on modernizing and upgrading infrastructure to improve efficiency and reduce operational costs. Maintain a transparent pricing mechanism that reflects market dynamics while providing consumers with predictability. Simplify and expedite licensing and regulatory processes for LPG companies to encourage investment and market participation. Enhance coordination among regulatory authorities to reduce administrative bottlenecks. Offer incentives for domestic and foreign investment in the LPG sector, such as tax incentives and reduced regulatory barriers. These recommendations aim to create an environment conducive for the LPG industry in Bangladesh, fostering growth, profitability, and sustainability while prioritizing safety, consumer welfare, and environmental concerns. The effective implementation of these strategies requires close collaboration between government agencies, industry stakeholders, and regulatory authorities.