The government has given the nod to Beximco Group, one of the largest conglomerates in Bangladesh, to set up 500 LPG (liquefied petroleum gas) refuelling stations across the country in the next two years.

Beximco would franchise the operations of the filling stations and the first one would open in July.

The cost of the project, which includes selling of LPG for cooking and industrial purposes, was estimated to be around Tk 1,000 crore, according to the company.

“We have agreed in principle that Beximco can go ahead with its plan to set up 500 LPG filling stations,” Shamsul Alam, chief inspector of explosives, told The Daily Star.

He said the department of explosives had also given Beximco the layout of the stations. Later, each of 500 stations would be awarded licences, he said.

On allowing a single company to run a huge number of stations, Shamsul said the government had decided to promote LPG use in vehicles as natural gas supplies were shrinking. He also said the government was drafting a policy that would promote the use of LPG by vehicles.

LPG is relatively a new thing in Bangladesh and the market is still small. LPG as an alternate fuel for motor vehicles is newer though it is used in more than 100 countries, including India.

Bangladesh consumed only 1.6 lakh tonnes of LPG in 2015 to meet the growing demand for cooking gas, according to industry sources. Of which, 1.42 lakh tonnes were imported and 18,000 tonnes were generated from different government factories as a by-product.

According to the department of explosives, 35 LPG filling station licences have been issued to companies and individuals. Of which, around 10 have already started their operations. Another 35 applications for licences were pending with the department.

In this situation, many raised their eyebrows because they found it very difficult to get even one licence but Beximco was allowed 500.

CNG filling station owners said they should be given preference for LPG filling station licences as they have the infrastructure and experience.

Beximco Group established Beximco Petroleum Ltd in 2009 to explore opportunities in liquid fuel supply in Bangladesh, according to its website.

But there had been no significant development until now.

Salman F Rahman, vice-chairman of Beximco Group, sees a huge potential for LPG as the supply of natural gas is shrinking.

“This business [LPG] will become very big. It will be a fast growing business,” said Salman.

He said Bangladesh economy had been growing at 6-7 percent a year for several years but energy sources, especially natural gas which is considered cheap and clean, was on the decline.

“Forecast shows LPG price will remain stable for the next 4-5 years, even if the price of oil increases,” he said.

LPG price has dropped to $350 a tonne from $1,400 in 2011.

Some have shown interest in franchising the LPG filling stations.

Index Group, now gearing up to enter the LP cooking gas market, is one of those interested.

“We have agreed to take 20 stations from Beximco,” said Shafiullah Al Munir, chief executive of Index Group.

Initially, Beximco would use facilities of other companies before building its own structure at Mongla port, said Salman.

“We will use the storage facility of Index at Mongla,” he said.

Index has a 6,000-tonne storage facility at Mongla, which the company claims is the largest in Bangladesh.

Industry insiders said there were no government rules on setting the price for LPG in Bangladesh. Entrepreneurs who have started the business set the price themselves.

According to Totalgaz, a French company that has set up two LPG filling stations, the approximate cost savings of LPG over petrol is about 30 percent.

“Our assessment shows that if LPG price is less by 35 percent than octane, it is viable,” a senior official of Totalgaz said, wishing not to be named.

Totagaz sells LPG for motor vehicles for Tk 55 a litre, which costs Tk 59 at Bashundhara LPG filling station.

Zakir Hossain Nayon, former president of Bangladesh CNG Filling Station and Conversion Workshop Owners' Association, said it won't be easy for Beximco to install 500 filling stations.

“Beximco can do it with the existing CNG filling stations, which have the infrastructure and experience,” Nayon said.

There are around 600 CNG stations across the country.

“Many of these CNG filling stations may be converted to LPG stations if it [LPG] gets popularity. So there will be an imbalance in the market,” he said.