The government has taken initiatives to revise VAT and taxes on imported and locally produced liquefied petroleum gas (LPG) to address the ongoing supply crisis.
At the same time, measures have been introduced to simplify the process of obtaining bank loans and opening letters of credit (LCs) for LPG imports.
On Thursday, the Energy and Mineral Resources Division (EMRD) sent a letter to the National Board of Revenue (NBR) requesting necessary steps to reorganize the tax structure by classifying LPG as a “green fuel,” considering the current situation.
On the same day, the EMRD also wrote to the governor of Bangladesh Bank, asking commercial banks to prioritize loan and LC applications for LPG imports.
The letter to the NBR noted that nearly 98% of LPG used in the country is imported by the private sector, serving both industrial and household needs. During the winter, international supply typically drops, and domestic pipeline gas availability also decreases, causing a significant surge in LPG demand. This winter has been no exception, resulting in a severe supply crunch directly affecting consumers. Several media reports have highlighted this crisis in recent weeks.
At a meeting with leaders of the LPG Operators Association of Bangladesh (LOAB), the proposal to revise the VAT and tax structure for both imported and locally produced LPG was raised. The meeting emphasized the importance of maintaining market stability and normalizing supply.
Earlier, at an advisory council meeting in the Internal Resources Division on December 18 last year, it was suggested that VAT exemption on imported LPG be withdrawn and a 10% VAT imposed instead of the previous 15 percent, while the existing 7.5% VAT on local production and VAT exemptions on traders and advance taxes should also be revised.
Before implementation, the council stressed the need for a detailed analysis of how these measures would affect consumer LPG prices. For this purpose, the Energy and Mineral Resources Division, Ministry of Commerce, and Internal Resources Division were instructed to review the proposal jointly.
The advisory council’s decision was later presented at a LOAB meeting, where the EMRD agreed. However, LOAB members requested that VAT on imports be reduced to zero percent. Review of the relevant memorandum shows that LOAB had previously agreed in principle with the advisory council’s proposals.
The EMRD’s letter also stated that to normalize LPG supply amid the current crisis, VAT exemptions on imported LPG should be withdrawn and rates set below 10%, while local production VAT, trader VAT, and advance tax exemptions should be applied, consistent with the advisory council’s recommendations. NBR was requested to take the necessary steps accordingly.
In the letter to the Bangladesh Bank governor, the EMRD reiterated that nearly 98% of the country’s LPG demand is met through private sector imports, primarily for industrial and household use. Winter supply reductions both internationally and domestically, coupled with lower pipeline gas availability, have increased LPG demand and caused a severe shortage impacting daily life.
To address this, LOAB requested that banks prioritize loans and LC applications for LPG imports and that the sector be treated as “green industry,” allowing easy financing through Bangladesh Bank’s Green Fund. Such measures are expected to resolve the sector’s problems and ensure LPG is supplied at government-fixed prices.
The letter urged that loan and LC applications be processed quickly and on a priority basis to stabilize the LPG market.