Tackling LPG crisis: Govt eases loan, LC processes after VAT cut proposal

In a bid to normalise the volatile liquefied petroleum gas (LPG) market, the interim government has directed commercial banks to prioritise loan approvals and the opening of letters of credit (LCs) for LPG importers.

The Energy and Mineral Resources Division issued a circular yesterday (8 January), instructing authorities to process LPG-related financial applications on a priority basis.

The directive, signed by Deputy Secretary Mia Mohammad Keyamuddin, follows a meeting with the LPG Operators Association of Bangladesh (Loab), where the importers showed the challenges of securing timely financing during the high-demand winter season.

At the meeting, the association urged commercial banks to prioritise loan disbursement and LC opening for LPG imports.

Based on the meeting's decisions, the ministry has instructed concerned authorities to ensure that loan and LC applications related to LPG imports are processed swiftly and on a priority basis to normalise market supply.

The move comes as the nation grapples with a severe supply crunch and a surge in retail prices that has left consumers in a bind.

Loab also proposed recognising LPG as a green industry and extending easy-term financing from Bangladesh Bank's Green Fund. According to the circular, such support would help address sector-specific challenges and allow operators to supply LPG at government-fixed prices.

The Energy Division noted that nearly 98% of the country's LPG demand is met by private sector imports.

Historically, supply tightens in winter due to global shipping constraints, while the simultaneous drop in domestic pipeline gas pressure forces more households and industries to rely on gas cylinders.

This seasonal spike in demand has led to an acute shortage, with 12kg cylinders reportedly being sold for up to Tk1,500 to Tk1,800 in some areas — well above the government-fixed January rate of Tk1,306.

Parallel to the financial easing, the Ministry of Power, Energy and Mineral Resources has formally proposed a significant tax overhaul to the National Board of Revenue (NBR) on the same day.

The proposal seeks to reduce the value-added tax (VAT) on LPG imports from the current 15% to below 10%.

Furthermore, the ministry has recommended withdrawing the existing 7.5% VAT at the local production stage and exempting traders from advance income tax. While the NBR has confirmed receipt of the proposal, officials stated that the matter is currently under review to ensure that tax cuts translate into lower prices for the end consumer.

Welcoming the initiatives, Loab President Amirul Haque said the steps would help ease the LPG crisis in the near term.