The shortage of liquefied petroleum gas (LPG), used for cooking, shows no sign of easing. Even after the price of the most widely used 12kg cylinder was raised by Tk 252, consumers are still having to pay Tk 500 to Tk 600 above the official price.
In some places, retailers are refusing to take back old cylinders, forcing customers to buy new ones. Meanwhile, the process of raising prices yet again has begun.
The official price of a 12kg LPG cylinder for October has been set at Tk 1,837. However, cylinders are selling for Tk 2,300 to Tk 2,500 in the market. Prices are higher in Dhaka than in districts outside the capital.
Meanwhile, businesses have submitted a proposal for another price hike. The Bangladesh Energy Regulatory Commission (BERC) will hold a public hearing on the proposal on 29 October.
On Saturday, tea vendor Md Shahed at Karwan Bazar said he had paid Tk 2,500 for a 12kg cylinder. Surma Begum, a resident of Mohammadpur, said she had bought a 12kg cylinder for Tk 2,300 last Friday. However, a relative of hers bought LPG for Tk 2,100 in their village home in Bhola on the same day.
According to sources at the LPG importers’ association, the LPG Operators Association of Bangladesh (LOAB), and the regulatory body BERC, 23 companies in the country have the infrastructure needed to import LPG. Thirteen companies imported LPG in August and 10 in September.
Some companies are buying LPG from others and supplying limited quantities to the market, while others are supplying only nominal amounts. As a result, the supply shortfall persists.
People involved in the LPG sector say prices in the international market rose last month after the war in the Middle East spread to Saudi Arabia. Shipping costs also continued to rise. However, domestic prices were adjusted only on 4 October.
Stockpiling had begun earlier, on 22 September. Importers, distributors and retailers all accumulated stocks, pushing prices up in anticipation of a shortage. Even after BERC raised the official price, the practice of charging consumers more than the fixed rate continued.
International prices have since risen further. Distributors and importers have also demanded increases to cover other costs. Taking their demands into consideration, BERC has scheduled a public hearing for 29 October. There is therefore little prospect of prices falling in the immediate future.
Senior officials of three LPG companies said demand was rising not only for cooking but also in the industrial and transport sectors. They said there would be no shortage if the sector's full storage capacity were used and all cylinders remained in circulation.
Four cylinders are needed to ensure that one LPG cylinder is available to a customer, as the others are required to maintain the supply chain. At present, at least 120,000 tonnes of LPG are supplied each month for cooking.
This enables customers to receive 8.3 million cylinders containing 12kg each. To maintain this supply, 33.2 million cylinders are required, but that number is not regularly available. If at least another six million cylinders were in active circulation, monthly deliveries to customers could increase by 1.5 million cylinders.
BERC Chairman Jalal Ahmed told Prothom Alo that imports had not declined, so there should be no supply crisis. BERC has written to the Energy Division seeking easier letters of credit (LCs) for companies unable to import LPG. The Energy Division has already taken steps, and the situation is improving, he said.
He added that the public hearing would discuss in detail the need to buy different cylinders because of shortages, as well as proposals to raise prices and commissions. The commission will announce its decision after the hearing.
Full capacity not being utilised
According to LOAB and BERC sources, the private sector controls 99 per cent of the LPG market. There are approximately 53 million cylinders in the market. Of these, 30.7 million belong to the 10 companies currently active in the sector. This means 42 per cent of the cylinders are not in regular use.
All companies together have an LPG storage capacity of 180,000 tonnes. The 10 active companies account for 95,000 tonnes of that capacity. In other words, 47 per cent of the sector''s storage capacity remains unused because the other companies are not importing LPG.
As a result, many distributors are unable to obtain LPG and are buying small quantities from other distributors. Consumers are struggling not only with higher prices but also with access to cylinders.
Retailers are unwilling to accept cylinders belonging to companies that have ceased operations. This is forcing some customers to purchase new cylinders. Under the rules, however, all companies are required to take back cylinders, regardless of the brand. The shortage could ease if companies still operating regularly increased cylinder production.
Selim Khan, president of the LPG Business Welfare Association, told Prothom Alo that stockpiling was one problem, but an even bigger issue was that nearly 25 million cylinders were lying idle.
Ten to 12 companies were no longer supplying LPG, he said, leaving many distributors on the verge of bankruptcy and causing hardship for consumers. Measures should be taken to bring these cylinders back into use.
People familiar with the sector say imports have not increased in line with steadily rising demand. At one point, the country imported and supplied 180,000 tonnes of LPG a month. Now, imports do not exceed 160,000 tonnes. Some consumers have turned to alternative cooking fuels, such as electric stoves, to avoid the shortage. Otherwise, the crisis would have been even worse.
Abu Sayeed Raja, chief marketing officer of Fresh LP Gas, told Prothom Alo that the shortage would ease soon and that much of it had already subsided. There would be no supply shortage next month, he said, adding that efforts were under way to increase imports further.
Companies that have suspended imports say some of them have been unable to open LCs for the past two years. Banks are refusing to issue LCs unless the companies deposit the full amount in cash. Frozen bank accounts have also created difficulties with transactions. As a result, they have halted imports.
Regular importers, however, say there are currently no government restrictions. They argue that banks will inevitably create difficulties for companies with large outstanding liabilities, noting that these companies have borrowed thousands of crores of taka and are now unable to import LPG.
The country imported 158,000 tonnes of LPG in August and 156,000 tonnes in September.
Proposal to raise prices
Amirul Haque, president of LOAB, told Prothom Alo that importers were making every possible effort to increase imports and maintain supplies. However, stabilising the market would remain difficult until the situation in the Middle East returned to normal. Government monitoring must continue at every stage of the supply chain to keep the market under control, he said.
On 6 October, BERC sent a letter to the LPG Business Welfare Association regarding the sale of LPG at prices above the official rate.
The association says it is being forced to buy LPG at higher prices. In addition, rising fuel prices, licence fees and other associated costs have made it impossible to sell LPG at the fixed rate. It has demanded an increase in the commission paid on each cylinder. Under its proposal, the commission should rise by Tk 80 per cylinder. Retailers'' commissions may also increase.
Importing companies, known as operators, have also proposed a price hike. They say BERC sets the monthly price based on Saudi Aramco''s contract price, the premium covering shipping and insurance, the exchange rate of the US dollar and fuel prices. However, other costs have also risen over the past five years, and prices must therefore be increased, they argue.
M Shamsul Alam, energy adviser to the Consumers Association of Bangladesh (CAB), told Prothom Alo that several companies had stockpiled LPG to create an artificial shortage. They had extracted more than Tk 6 billion in additional revenue in a single month, he alleged.
Now, another hearing is being held to raise prices further. Consumers are being held hostage in what he described as a market driven by profiteering, while BERC remains inactive.
He called for a judicial investigation to identify and punish those involved in stockpiling, adding that their licences should be cancelled if necessary.