LPG prices rise in markets as commission moves to raise rates again

Consumers are having to pay Tk 500 to Tk 700 more than the fixed price for a 12-kg liquefied petroleum gas (LPG) cylinder. Without taking steps to stop sales at inflated prices, the Bangladesh Energy Regulatory Commission (BERC) has moved to increase the commissions of importers and sellers. This could further raise the cost of cooking gas for consumers.

BERC held a daylong public hearing on Thursday on a proposal to increase LPG prices. Importers, distributors and retailers called for higher commissions at the hearing. After evaluating their proposals, a technical committee of the commission recommended an increase of Tk 139 for a 12-kg cylinder. If implemented, the price of a cylinder currently set at Tk 1,837 would rise to Tk 1,976.

Although the commission has 60 days to announce its decision after the hearing, it has asked stakeholders to submit their comments by next Sunday. This leaves only one working day to provide feedback after the hearing. Earlier, BERC announced the hearing on 14 October amid threats of strikes by distributors and retailers. The Consumers Association of Bangladesh (CAB) has alleged that, instead of taking action against sales at inflated prices, the commission is rushing to raise prices.

Prices may also rise in November as part of the regular monthly adjustment. BERC and importer sources say that, due to increases in global LPG prices and shipping costs, the price of a 12-kg cylinder could rise by more than Tk 100 through the regular adjustment alone. If higher commissions are added, the burden on consumers will increase further.

However, BERC Chairman Jalal Ahmed said a decision would be made after analysing the views expressed by all participants at the hearing. He said complaints that LPG was not being sold at the fixed price were frequently raised, although it had also sometimes been sold at lower prices. As the costs, including commissions, were set in 2021, they could now be revised.

The LPG market has remained volatile for one and a half months. Prices were raised once in early October. Even after that, sales at higher prices have continued. Of the 35 companies involved in the LPG business in the country, 23 have import infrastructure, but only 10 imported LPG last month.

Companies currently receive Tk 200 per 12-kg cylinder as the cost or commission for storage and bottling. Omera has proposed raising this commission to Tk 478, Petromax to Tk 349 and Delta to Tk 360. Meghna Group has proposed setting it at Tk 300.

Meanwhile, distributors have sought to raise their commission from Tk 50 to Tk 150, while retailers have applied for an increase from Tk 45 to Tk 70. A proposal has also been made to raise the commission on autogas used in vehicles from Tk 8 to Tk 11 per litre.

The private sector controls 99 per cent of the LPG market. Of the total LPG consumed, 80 per cent is used for cooking. More than 10 million customers use LPG. Although BERC has been adjusting prices every month since April 2021, consumers often have to pay more than the fixed rates.

After analysing the proposals, a technical committee formed by BERC said the price of a 12-kg cylinder could be set at Tk 1,976, with an increase of Tk 139. As part of this increase, the committee proposed raising the distributor-level commission from Tk 50 to Tk 80 and the retailer-level commission from Tk 45 to Tk 70.

Business representatives said the market would not stabilise unless prices were set at reasonable levels. They said this was not a demand raised suddenly; they had been making it to BERC for two years. A proposal to increase prices had been submitted a year ago. BERC had now arranged the hearing under pressure from the market situation. The commission for importers would have to be increased by Tk 100, distributors’ commission to Tk 70 and retailers’ commission to Tk 105. This would mean an increase of Tk 275. If this were implemented, no one would sell LPG at higher prices.

Abu Sayed Raza, chief marketing officer of Meghna Fresh LPG, said prices should be set after taking all factors into account so that no one could charge even one taka more than the fixed rate in the market. Prices must therefore be reasonable. The government could then take strict action against any deviation in the market.

Mani Mukta Pal, proprietor of Messrs Ujjal Traders, speaking on behalf of distributors, said their costs had also increased, just as operators had reported rising costs. At the same time, distributors had to bear the burden of idle cylinders. She demanded that distributors’ commission be set at Tk 150 per cylinder.

Serajul Mawla, president of the LPG Autogas owners Association, said more than 200,000 vehicles run on LPG. A commission of Tk 8 per litre had been set in 2021, and five years have passed since then. Operating costs have increased. Some stations in cities were making profits, but 80 per cent were operating at a loss. He demanded that the commission be set at Tk 11.

Speaking at the hearing on behalf of companies unable to import due to letter of credit (LC) complications, Anup Kumar Sen, chief operating officer of Orion Gas Limited, said 10 companies were unable to import under the new circumstances. Their infrastructure was lying unused, creating a shortage of cylinders in the market. It was not possible to buy LPG from other companies and sell it at the price set by BERC.

LPG importers and BERC faced strong criticism at the public hearing on the proposed price increase. Consumers raised widespread questions about the failure to ensure sales at government-fixed prices and the regulator’s inaction. Some distributors and retailers also questioned the importers.

Abu Taher Qureshi, speaking on behalf of distributors, said bottled LPG was supposed to be delivered to distributors’ premises. But whenever a shortage began, suppliers stopped deliveries. This added to costs and made it impossible to sell at the fixed price.

Syed Mizanur Rahman, who attended the hearing as a representative of the Bangladesh Economic Association, said the association was boycotting the hearing in protest against LPG being sold at prices higher than those fixed by BERC, the collection of additional charges and the failure to take action over these complaints.

Khalilur Rahman, a representative of CAB, presented seven written demands on behalf of the organisation. He said it was BERC’s responsibility to look after consumers’ interests. Without doing so, the hearing would not be meaningful. He called for no increase in prices and demanded that sales and purchases at the rates announced by BERC be ensured.

The importing companies said BERC sets new prices every month based on Saudi Aramco contract prices, premiums (shipping and insurance costs), the dollar exchange rate and fuel prices. However, other costs had also increased over the past five years. Prices therefore needed to be revised.

M Shamsul Alam, CAB’s energy adviser, told Prothom Alo that companies have proposed another price increase while selling LPG in the market at whatever prices they chose. No action has been taken against sales at inflated prices. By rushing to raise prices, the commission was essentially going through the motions. The prices has, in effect, already been decided. This had failed to ensure energy justice for consumers.