Govt to import LPG to stabilise market, 'curb private sector dependence'

Highlights:

• Government plans BPC-led LPG imports to stabilise prices and supply
• BPC seeks G2G approval to reduce private sector dominance
• Private operators currently control all LPG imports and distribution
• Rising demand and shortages exposed government's limited intervention capacity
• BPC lacks LPG infrastructure, may use private operators' facilities
• Bangladesh Bank eased LPG imports with deferred payment facility

The government is planning to import liquefied petroleum gas (LPG) through the state-owned Bangladesh Petroleum Corporation (BPC) to stabilise the domestic market and protect consumers from artificial shortages and price volatility.

The BPC has already sought approval to import LPG on a government-to-government (G2G) basis, sending a letter to the Ministry of Power, Energy and Mineral Resources on 10 January.

Speaking to The Business Standard yesterday, Energy Adviser Muhammad Fouzul Kabir Khan confirmed the plan and said the government would allow the BPC to import LPG under G2G arrangements to reduce the country's heavy dependence on the private sector for meeting domestic demand.

BPC Chairman Md Amin Ul Ahsan said importing LPG from the same international suppliers that provide fuel oil to Bangladesh would help create a more competitive and stable market environment.

Meanwhile, private sector operators have also welcomed the initiative, saying it could help ease supply constraints if BPC imports LPG at lower prices and supplies it to private operators.

Private operators dominate market

Currently, LPG import and distribution in Bangladesh is entirely controlled by the private sector. There is no system for direct LPG imports by the government or the BPC.

As a result, when artificial shortages or supply disruptions occur, the government has limited capacity to intervene effectively and stabilise the market.

Bangladesh's annual LPG demand is around 17 lakh tonnes and is rising every year. Industry insiders estimate that demand could increase to between 25 lakh and 30 lakh tonnes by 2030.

At present, BPC meets only about 1.33% of domestic demand. This small volume is produced as a by-product during crude oil processing at the Eastern Refinery.

The government's move follows a recent intensification of LPG shortages in the domestic market. 

Despite holding several meetings with traders, the government was unable to take effective steps to resolve the crisis. Instead, traders placed various demands, including tax relief, before the authorities.

Fouzul Kabir told TBS that BPC would be authorised to import LPG under G2G arrangements if its existing foreign fuel suppliers are willing to supply LPG.

"Through this, the government will be able to play an effective role in stabilising the LPG market and breaking syndicates," he said.

Azam J Chowdhury, former president of the LPG Operators Association of Bangladesh and chairman of East Coast Group, described the proposal as a positive step.

"It would be very good if BPC imports LPG at lower prices under G2G arrangements. The current LPG supply is low," he said.

He noted, however, that BPC does not have LPG storage facilities and suggested that imported LPG should be supplied to private operators after import.

Infrastructure constraints

In its letter to the energy ministry, BPC Chairman Md Amin Ul Ahsan said the corporation lacks the necessary infrastructure for LPG storage and unloading, including jetty-based pipelines, flow meters and storage tanks.

He noted that private LPG operators currently unload LPG from carrier vessels through lighter ships in the deep-sea area of Kutubdia and store it at their own terminals.

BPC, he said, could adopt the same method by using lighter vessels of interested private operators to unload and distribute imported LPG.

He suggested that, in consultation with the LPG Operators Association of Bangladesh, a list of interested operators could be prepared, along with decisions on import volumes, payment methods, and unloading and distribution processes.

Officials at the Energy Division said at a meeting held on 7 January, chaired by the division's secretary, the issue of importing LPG through BPC and supplying it to private companies was reviewed, and a decision was taken to send a proposal to the ministry.

The BPC, in its letter, further noted that in the past it has imported additional fuel oil by seeking quotations from enlisted G2G suppliers when there was a sudden rise in demand or a supply shortage.

"In the same way, since our listed G2G suppliers are large refiners capable of producing and supplying various petroleum products, including LPG, it is possible to assess the feasibility of importing LPG by seeking quotations from them," the corporation said.

BPC also said it would explore other potential sources in the international market before selecting the most suitable option for LPG imports.

As part of broader policy support for LPG imports, Bangladesh Bank issued a circular on 12 January, classifying LPG as an industrial raw material.

Under the new directive, businesses can import LPG on deferred payment terms through suppliers' or buyers' credit for up to 270 days. 

The central bank said the move reflects the multiple stages involved in LPG processing, as the fuel is imported in bulk and later bottled for distribution.