In search of a ‘fair’ gas price 

Illustration:TBS

Soon after she got news that the government had raised the retail price of 12kg LPG (liquefied petroleum gas) cylinder to Tk1,313, Sonia Akhter — a tenant in the Mohanagar Project Residential Area of Rampura, Dhaka — calculated that the new price would compel her to pay Tk413 more than what she used to pay a year ago. 

The Mohanagar Project Residential Area can be considered a micro example in Bangladesh where three types of domestic gas supply users co-exist: non-meter and prepaid customers of the state-run Titas Gas; and private operators' LPG customers.  

The non-meter customers pay a fixed Tk975 for using double stoves, regardless of the amount of gas they burn monthly, while the prepaid customers pay comparatively less than all other types of gas consumers. According to the prepaid customers, Tk500-worth of gas supply a month is enough for a 5-member family.  

Sonia, the housewife taking care of a 5-member family, has no idea about how to pull the reins on her growing expenses thanks to the ever-increasing LPG price. Since April this year, the Bangladesh Energy Regulatory Commission (BERC) has readjusted the price of the private company-manufactured LPG six times in a row, with four upward and two downward shifts, citing a volatile international market. 

Given the unequal gas pricing system in the same locality, Mohanagar Abasik Samaj Kalyan Samiti (an association of house owners at Mohanagar Project Residential Area) President Mohammad Solaiman demanded the Titas Gas authority install a prepaid gas meter at all the holdings soon. 

"Because, the prepaid system is fair," he told The Business Standard. His demand for a fair pricing system echoes the other gas consumers, particularly the LPG users, as the recent increase in diesel-kerosene prices has reminded people that they have limited and weak control over the commodity market. 

Who can control the LPG price? 

The use of LPG at the domestic level started to grow since 2009 when the government suspended new household gas connections. BERC data shows the consumption of LPG for household cooking was around 59,000 tonnes in 2010. 10 years later, the amount rose to 935 million tonnes. 

Currently, in the country, there are 3.8 million LPG customers, 85 percent of which is used for domestic use. At least 29 companies - one state-run and 28 private manufacturers - are operating the import and distribution of LPG.  

The private operators had been at liberty to set their prices on their own. But on 12 April this year, for the first time, the BERC fixed the price for LPG manufactured both by the state-run Bangladesh Petroleum Corporation (BPC) and private companies. The prices of 12kg LPG cylinders were set at Tk591 and Tk975 for the BPC and private operators respectively. 

Due to a rise in LPG import costs, BERC readjusted the price for the private operators six times between April and November. But the price for BPC remains unchanged as the cost of LPG production from the locally extracted petroleum did not rise. The BPC meets less than two percent of the LPG demand. 

The volatile international market ultimately makes the end consumers suffer. When enquired, BERC chairman Md Abdul Jalil, said that the commission fixes LPG prices only on the basis of its public hearing. 

The latest LPG price hike, however, was not an immediate outcome of BERC's public hearing. BERC last organised a public hearing on LPG pricing in January this year. Followed by that hearing, the commission fixed the retail price of LPG in April.  

Every month, the BERC readjusts the LPG price in relation to the international market. The process was labelled 'unjustifiable' by the Consumers Association of Bangladesh (CAB) president Ghulam Rahman. 

"When the Saudi Contract Price (CP) rises, the LPG importers and distributors increase the retail price within one month. But when the Saudi CP falls, they do not reduce the price as quickly," said Ghulam, the former chairman of the Anti-Corruption Commission. 

He added that rapid price adjustment, in the long run, would destabilise market management. "This creates pressure on customers. I would say that price adjustment after three or six months is logical," he said.    

The University of Dhaka's Banking and Insurance Department lecturer and market analyst Professor Shahidul Islam Zahid observed that private operators in the LPG market — as a single group — are burdening the customers with a 'monopoly pricing.' 

"They could retail LPG at a comparatively lower price if the product value is fixed upon the marginal production costs. However, while bargaining for a price readjustment, they show ever-increasing depreciation costs, followed by an increase of production capacity."

"This is only for expanding their profit margin. The government should intervene on the issue with intent. Otherwise, the market will fail with an imbalance of demand and supply," Shahidul said.

Disagreeing with the aforementioned observations, Jakaria Jalal, head of division at Bashundhara LP Gas Limited, said that private LPG operators could supply the product at a lower price if they received some support from the government. 

"At a certain level when the international market price rises excessively, the government can subsidise the imports. Moreover, reducing the value-added tax from 7 percent to zero, and lowering the advance income tax would be enough incentive for us to supply LPG at less than Tk300, from the existing retail price," Jakaria said.    

No update of prepaid meter installation 

CAB president Ghulam Rahman strongly recommends widening the prepaid gas meter coverage. "This is a key to ensure 'fair' pricing of gas on a domestic level. The BERC has directed the Titas authority in this regard. I do not know what they are doing now," he said. 

So far, Titas Gas has implemented the 'Two Lakh Prepaid Gas Meter Installation Project' in some areas of Dhaka. But the state-run gas transmission and distribution company has more than 28 lakh customers domestically around 12 districts. Can the rest of the customers come under the prepaid metering coverage? If yes, then when? 

Following a growing demand for prepaid meters, Titas Gas has initiated to bring 1.2 lakh non-meter customers under the prepaid system by 2022. 

This correspondent tried to get an update from the project director Foyzer Rahman. Neither Foyzer nor Harunur Rashid Mollah, the Titas Gas managing director, responded despite several attempts to reach out for a comment.