Azam J Chowdhury The government needs to pursue a stringent policy to contain unauthorised sale and exchange of cylinders along with providing some budgetary incentives to ensure the organic growth of the LPG (liquefied petroleum gas) business.
In an interview with the FE, the chairman of LPG Association of Bangladesh (LAOB) Azam J Chowdhury said this while speaking on scenario of LPG, a green and clean hydrocarbon fuel industry.
The industry is seeing continuous surge as a significant number of semi-urban and rural households in Bangladesh are usingLPG cylinders to avoid troublesome traditional cooking amid depleting natural gas reserve and rapid urbanisation.
LAOB chairman Mr. Chowdhury said the government has given a good policy support for which the sector started thriving since 2017.
"But there should be a stringent policyfor ensuring our safety, health and keeping the environment pollution-free. Enforcement actions should be taken against wrong doers," said Mr. Chowdhury, alsothe chairman of East Coast Group.
He said cross filling, improvised infrastructure, trading in unauthorised cylinders sale and exchanges are threatening the healthy growth of the business.
Presently, more than 25 LPG companies are operating in Bangladesh and few more are in the offing.
The LAOB chairman Mr. Chowdhury said the country's market cannot support 25 LPG operators andit would be difficult for them to survive due to stiff competition.
"It is certainly over-crowded. It was not prudent to issue so many licenses," said Mr. Chowdhury.
He laid emphasis on prudence in issuing licenses as the closure of business is likely to create non-performing loans and loss of capital by sponsors.
"So many licenses are being issued without having a deep look in the market and it's potential," said Mr. Chowdhury, also the president of Bangladesh Association of Publicly Listed Companies (BAPLC).
According to him, all LPG import terminals are located in the river-based terminals and the draft does not allow import of larger size cargos in these terminals, thus import cost of product has to be based on LPG carriers which is expensive.
"We don't have a deep sea terminal that can receive refrigerated cargos reducing prices and cost on inventory."
While speaking on fiscal support from the government, the LAOB chairman said the LPG industry fortunately has grown up without subsidy.
"India gave subsidy but it could not be withdrawn despite lot of efforts to make this business self-reliant," said Mr. Chowdhury, adding that taxes & VAT exemptions are required to be followed for at least five years till the business is sustained and stabilised.
He said the government has started imposing VAT and this will escalate cost and the industry's growth may decline.
The LPG cylinders manufacturing in Bangladesh is considered as an import substitute industry. The government is allowing import of the items when the local manufacturers have surplus capacity.
In this regard, the LAOB chairman said he is not against import but the government should protect this heavy local industry imposing an import tariff structure.
"It is an import substitute industry having great potential to export meeting local demand. Currently, Bangladesh has demand for 6 million cylinders while the local manufacturing capacity is in excess of 9 million cylinders in a year," said the chairman of LAOB.
In his reply to a question on consumers' allegation regarding high retail price, he said consumers in Bangladesh are currently enjoying one of the lowest LPG prices compared to the world.
"Unfortunately, the intermediaries in the distribution are making more money than the operators. The benefit of local prices can be passed on to consumers if the margin taken by the intermediaries, particularly distributors and retailers, are rational."
"If consistent policy is maintained by the government, the total demand for LP Gas may rise to three million tons from the current level of 8,00,000 tonnes."
While speaking on consumers' safety, the LAOB chairman said the capacity of Explosives Department has to be increased along with scaling up its presenceacross the country to ensure safety monitoring in operations.
Presently, more than 95 per cent of local demand for LPG is met through imports. Asked about the rationale behind exporting LPG to neighbouring countries, Mr. Chowdhury said export from Bangladesh is only considered if value addition is more than 5.0 percent as per Entry Port import policy.
"Exporters earn foreign currency with a profit after meeting all cost. This proves that Bangladesh entrepreneurs are able to trade beyond borders benefiting the country."
Mr. Chowdhury is also a director of Omera Petroleum, a subsidiary of listed company MJL Bangladesh, having around 16-17 percent share in local LPG market.
Asked about business hurdles faced by his own company, he said no business can run without challenges.
"Our difficulty is that we are a compliant company and being compliant one has to be more expensive. We believe in sustainable business policy maintaining high ethical and moral standard," said Mr. Chowdhury.
He said they continued company's expansion since inception. "Omerais a most a valued brand and very popular among the users. We will continue to invest and make sure we have availability maintaining quality and safety in our operation across the country."
Omera Petroleum has already completed some initial processes to float shares under book building method.
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