Price control mechanism for LPG must

Published: 00:00, Oct 29,2020


THE proposal to increase liquefied petroleum gas price appears unjustified especially when the price significantly declined on the international market during the COVID-19 pandemic. The price declined to a record low internationally in April with one tonne selling for $237. Keeping to the trend, the state-owned LPG company reduced the price by 15 per cent in July, but the private sector kept having a significantly high profit margin. They are now considering a price increase by Tk 70 a cylinder and trying to justify the move on grounds that the price may increase internationally by $50 a tonne. A leading LPG company has already increased the price by Tk 40 for a refill of 12kg bottle in two phases in October and it has done so without any notice for consumers. The price increase defies logic and shows the government’s failure to regulate the LPG market. During the COVID-19 emergency, when a large majority of people have faced income loss, such an arbitrary increase burdens an already struggling household economy.

The demand for LPG grew exponentially when the government stopped giving household gas connection in 2014–15 to address the problem of depleting natural gas reserve and the unavailability of firewood. Energy experts lauded the move but remained critical of the absence of a price regime, with no maximum retail price stamped on the LPG bottles and little regulation of the market. The absence of regulation appears to have allowed the private sector to control the market. According to international guidelines and a 2002 government circular, gas cylinders must undergo fitness tests every five years. In practice, the regulation is widely flouted. The energy ministry has time and again announced that it will have a mechanism to set LPG prices keeping to the global market to control overpricing, but the words have never been materialised. The LPG price is revised on the first day of every month based on the average international rate for benchmark fuel and foreign exchange rate of the preceding month. The LPG price should, therefore, decline in Bangladesh when the global market was hit by the pandemic.

The use of LPG in Bangladesh stands at around 10 lakh tonnes, which was only 47,000 tonnes in 2009. The demand is projected to increase to more than 25 lakh tonnes by 2025. The government must, therefore, work out a regulation strategy for the rapidly growing market that will enforce a maximum retail price and ensure routine fitness check of containers. In order to protect consumer rights in the COVID-19-hit economy, the government must immediately sit with all stakeholders to discuss the increase proposal that appears unjustified given the decline of price on the global market.

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