VAT relief, lower interest rates, easier LC processing agreed to ease LPG crisis

Infographic: TBS

The government and LPG industry stakeholders today (4 January) agreed on a package of temporary measures to ease the ongoing LPG supply crunch, including VAT relief on imports, cheaper loans and easier access to bank letters of credit.

The proposals, however, will require final approval following reviews by the Bangladesh Bank and the National Board of Revenue before they can be implemented, officials said after an emergency meeting. 

The meeting agreed to formally request the NBR to temporarily reduce VAT at the bottling stage, while the central bank will be asked to consider extending green financing facilities to LPG operators at single-digit interest rates.

The energy ministry secretary will send official letters to the relevant authorities to pursue these proposals, according to participants familiar with the outcome of the meeting.

The government also decided to strengthen market monitoring through district administrations and consumer rights officials to prevent price manipulation and artificial shortages at the retail level.

Speaking after the meeting, Joint Secretary Monir Hossain Chowdhury said discussions with businesses confirmed that companies had not sold LPG above the prices set by the regulator. He said price manipulation had taken place mainly at the retail stage.

The meeting was held at the energy ministry with the LPG Operators Association of Bangladesh (LOAB), amid growing concern over supply shortages and sharp price hikes at the retail level.

Officials expressed concern over the uncontrolled rise in retail prices, stressing that essential goods such as fuel should not be sold arbitrarily, similar to the regulated pricing regime at petrol pumps.

Industry concerns

They noted that effective oversight of the LPG retail market remains weak, while the lack of visible enforcement by law enforcement agencies has worsened the situation.

LOAB President and Delta LPG Managing Director Amirul Haque said, "Global LPG markets were currently highly volatile, forcing Bangladesh to seek supplies from new sources, including Argentina."

He said operators had urged the government to fully liberalise LPG imports by removing quota-based or permit-related restrictions, a request officials said had already been addressed.

Amirul Haque also reiterated the industry's demand for temporary VAT withdrawal, noting that LPG receives no government subsidy, unlike LNG, making continued taxation an added burden on consumers.

He said no LOAB member or bottling plant had sold cylinders even one taka above BERC-fixed prices, despite difficult market conditions.

Industry representatives said that since 5 August, some large companies had been unable to import directly and were sourcing LPG from the local market to maintain supply.

LOAB Vice President and Energypac Managing Director Humayun Rashid said LPG industries globally receive easy-term financing, while Bangladeshi operators face interest rates of around 15 per cent.

He said LPG qualifies as a green fuel and should receive single-digit interest rates under green financing schemes, which would help reduce consumer prices.

Rashid also highlighted disparities in gas pricing, noting that some households enjoy cheaper piped gas while others rely on costlier LPG, calling for policy support to address the imbalance.

Other operators, including Meghna, Omera and JMEI, urged faster LC approvals and priority treatment from banks to avoid import delays.

Current LPG shortage

The current shortage was triggered by reduced imports by several companies and a seasonal spike in winter demand, according to market insiders.

Consumers across Dhaka and other regions have struggled to find LPG cylinders for nearly two weeks, with many retailers reportedly charging up to Tk2,000 for a cylinder officially priced at Tk1,253.

Market participants said LPG imports fell sharply in December, while global prices rose by at least $35 per tonne within a week, prompting companies to cut shipments.

However, industry leaders later told the meeting that November imports stood at 105,000 tonnes, rising to 127,000 tonnes in December, suggesting no logical basis for the supply disruption.

They alleged that some retailers created an artificial shortage in anticipation of a price revision by BERC, which raised the cylinder price to Tk1,306 on Sunday evening.

The energy ministry has requested the cabinet and home ministries to empower district and upazila administrations to conduct mobile courts against illegal practices.

LPG operators urge action against overcharging retailers

In a statement issued later in the day, LOAB said recent price hikes in the retail market have caused confusion and hardship for consumers, even as the government maintains there is no supply crisis or import restriction.

It said the issue was discussed at the meeting held at the energy ministry, where industry representatives pointed to rising global freight charges and higher LPG prices in Europe and other markets as key reasons behind the disruption in the supply chain.

Despite these pressures, LOAB said the overall stock of LPG in the country remains "satisfactory" and that the ministry assured there would be no ceiling imposed on LPG imports.

However, the association noted that some retailers have been selling LPG cylinders at prices higher than the officially announced rates, worsening public anxiety and putting an extra financial burden on consumers.

"Such practices are creating unnecessary hardship for consumers and confusion in the market," reads the statement.

LOAB urged the government to take immediate and effective action against retailers charging excessive prices in violation of existing regulations. It also called for stricter monitoring and enforcement to protect consumers and restore market discipline.

The association further requested the authorities to strengthen market supervision to ensure LPG is sold at fair, government-approved prices, stressing that transparency and stability are crucial for the sector.