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LPG consumption mired in quagmire

  • Published at 12:51 am October 1st, 2017
LPG consumption mired in quagmire
Rural people are still using firewood and kerosene oil to prepare their food as the authorities have yet to transform their plans to popularise the consumption of LPG at the household level into action. The government formulated a set of regulations, undertook numerous projects and gave licence to private companies in a bid to make LPG (liquefied petroleum gas) available to the people, particularly in rural areas. In July 2011, Bangladesh Petroleum Corporation (BPC) undertook a Tk210.46cr project to set up an LPG bottling plant at Mongla of Bagerhat. The project would have included import facilities, storage tanks and pipelines had it been implemented. BPC, which owns a fourth of the country’s LPG market, produces 20,000 tonnes of LPG per annum as byproducts at Eastern Refinery in Chittagong and at Kailashtila Gas Field in Sylhet. With the project not seeing the light of day, state-owned LP Gas Ltd, however, is looking into signing a joint venture agreement with a private company to set up a bottling plant with a storage capacity of 100,000 tonnes at Mongla. The plant will feature storage tanks, and import and distribution facilities. During a talk with the Dhaka Tribune, LP Gas Ltd General Manager Fazlur Rahman said: “We have recently invited an expression of interest (EoI), against which 16 companies had their proposals. Now, we have asked them to submit their requests for proposal (RFP). “We hope we would usher into a new era once the project is implemented.” In 2011, a bottling plant with a storage capacity of 100,000 tonnes was supposed to be constructed at Kumira or any other suitable place in Chittagong at a cost of Tk250cr, and another 240,000-tonne capacity plant at Elenga of Tangail. But neither of the projects made any progress. Absence of proper regulations and monitoring, married up with the ever increasing demand for LPG cylinders, contributed to the rampant use of cylinders.

Outdated cylinders and explosion risks

LP Gas Ltd under the BPC has so far imported 450,000 LPG cylinders, most of which were outdated and therefore hazardous, and were supposed to have been scrapped. But, many of the cylinders are now available in markets, posing a grave safety risk to their users. Asked, Fazlur Rahman said: “We have decided to import another 47,000 cylinders with valve and protection caps to replace the outdated ones.” The decision was taken because of the risk of cylinder explosion that has worryingly increased due to the widespread use of substandard, unsafe cylinders. “All cylinders in markets will be replaced with new ones in phases. And it requires a huge fund. So, we have taken measures initially to replace 47,000 cylinders,” the official added.

Substandard cylinders flooding markets

LPG cylinders that are imported by the state-owned company have a lifespan of 15 years. Once expired, the cylinders must be replaced and disposed of to avoid leakage or other possible hazards, especially at the consumer end. But the cylinders brought into Bangladesh do not undergo safety checks by the authorities concerned. Taking the advantage of this, suppliers are importing substandard cylinders in bulk, contributing to the risk of fire and explosion hazards. The current annual supply of LPG has been estimated at about 600,000 tonnes and the demand at 1,000,000 tonnes. Around five million cylinders – both government-issued and privately bought— are in use in the country, according to Md Shamsul Alam, chief inspector at the Department of Explosives. Shamsul said it is difficult for them to check all the cylinders individually, as the department is desperately understaffed.

New LPG policy unfavourable

Industry insiders say the LPG Operational Licensing Policy 2017, stipulated by the government, is unfavourable to small enterprises and fraught with numerous inconsistencies. Wishing to be anonymous, director of a privately run LPG company said: “There are many bureaucratic complexities surrounding the policy. If they [small entrepreneurs] want to launch a business, they will have to take permission from eight different authorities. Earlier, permission was issued by only three authorities.” As per the current policy, to set up and run an LPG terminal or a plant or any other business related to LPG, permission needs to be obtained from the Department of Environment, Bangladesh Standard and Testing Institute, Department of Explosives, Fire Service and Civil Defence, and district and local administrations, while the final approval must be taken from Energy and Mineral Resources Division. In some cases, permission is needed from the Ministry of Commerce, Bangladesh Investment Development Authority, Bangladesh Energy Regulatory Commission and other ministries and departments concerned. Industry insiders think that such difficulties in gaining permission will impede popularisation of the consumption of LPG at the household level. On the other side, the policy will give local conglomerates the leverage to monopolise the sector, they believe. The policy also states that people wishing to launch LPG business will have to build a reserve tank at first with a capacity of 5,000 tonnes in addition to a road tanker or a vehicle to transport LPG.

Private firms dominant

Of the 600,000 tonnes of LPG supply, private companies are producing some 580,000 tonnes, while the state-run LP Gas Ltd produces only 20,000 tonnes. Around 10 private companies are monopolising the sector. The firms could not have been so dominant had the projects, undertaken by the government, been implemented in time.

Low consumption, slow growth

Most private companies, which have got licence, are yet to start setting up bottling plants, causing a slow growth in the LGP sector. In the last five years, consumption of LPG in households increased by only 5%. However, neither the government nor private companies could provide specific data on how much LPG is consumed a year in the country. LPG is not only consumed in households and in restaurants, but it is used in converted vehicles. Some industries have started to use LPG of late. Its consumption, however, did not increase as expected.

Different prices at different places

Also, there are widespread objections among consumers against LPG cylinder price. They said they have to pay different prices for a same product of a company in different areas. A 12.5kg cylinder sells at Tk950 in Dhaka, while it is priced between Tk1,100 and Tk1,200 in Rajshahi, Khulna and Barisal. On the other hand, a cylinder of state-run LP Gas Ltd sells at Tk800, though it is priced at Tk700. This type of cylinders, however, is not available in markets due to a supply shortage.