LPG Cylinders: Govt-fixed prices exist only on paper

Bangladesh Energy Regulatory Commission fixes price of liquefied petroleum gas every month, but consumers buy the key fuel at a higher price due to non-compliance by importers, distributors, and retailers.

On August 2, the BERC fixed the retail price of a 12kg LPG cylinder at Tk 1,140. Consumers in different parts of Dhaka, however, said they bought a refilled 12-kg cylinder at no less than Tk 1,400.

The Daily Star talked to at least three LPG distributors and 10 retailers who all said they were buying LPG cylinders at a higher rate than the price fixed by the energy regulatory body.

The retailers blame the distributors while the distributors point fingers at the importers. But importers lay the blame on shortage of import, volatile foreign exchange rate and challenges in opening letters of credit.

However, market experts and consumer rights defenders have said all these are lame excuses, stressing that the BERC fixes the rates every month after receiving input from the stakeholders.

They have also stressed that there is a lack of strict monitoring, which only helps the blame game, causing suffering to consumers.

During recent visits to the capital's Kachukhet, Shewrapara, Tejturibazar, Karwan Bazar, Bongshal, Banasree and Moghbazar area, The Daily Star found that a 12-kg LPG cylinder was sold even at Tk 1,500 in many places.

Moreover, distributors have mentioned supply shortfall as another factor contributing to LPG high price.

Wishing anonymity, a distributor of importing company Fresh LP Gas said, "This month the company hiked the price of a 12-kg cylinder at least six times, each time by Tk 20-30."

He said he had bought 70 cylinders on August 20 at a rate of Tk 1,197.

"Our van has a capacity to transport around 360 cylinders at a time, costing around Tk 8,000, or Tk 22-23 per cylinder on each trip. But we got only 70 cylinders this time around, which increased the transport cost to Tk 114-115 per cylinder," he said.

Distributors often receive text messages about LPG price updates from the importers, also known as operators. In a message in mid-August, one importer mentioned the rate of a 12-kg cylinder as Tk 1,197, a 33-kg cylinder as Tk 3,067, a 35-kg as Tk 3,246 and a 45-kg cylinder as Tk 4,164.

The company was supposed to sell those cylinders at Tk 1,045, Tk 2,872, Tk 3,047, and Tk 3,916 respectively in compliance with the BERC-fixed rates.

"We are supposed to take Tk 50 per cylinder as distributor's charge, but we took Tk 100 because of the hassle and increased transport cost," said the dealer.

Contacted, Fresh LP Gas Chief Operating Officer Mohammed Nurul Alam said they were following the BERC rate.

"We can control the distributors, but we have no control over the retailers who are increasing the price," he said.

Asked whether they were selling at a higher rate to the distributors, he said they had reduced the commissions of distributors to keep prices on a par with the BERC rate, adding that they were not responsible for the commission the distributors were taking beyond the fixed price.

Alam, however, highlighted the issue of devaluation of taka against dollar as a major problem in opening LCs.

"The BERC fixes the dollar rate at Tk 111 but we are spending Tk 116 per dollar to open LCs. That's why we have reduced the volume of our import," Alam claimed.

Jakaria Jalal, head of division at another importing company Basundhara LP Gas Ltd, said they had reduced LPG import for around 30 percent due to some problems related to the opening of LCs.

This newspaper has collected a cash memo given to a distributor by another LPG importer Beximco LPG. The memo shows a 12-kg cylinder was sold for Tk 285 more and a 20-kg one for Tk 410 more than the BERC rates.

Distributors, on the other hand, were found to sell 12-kg cylinders at Tk 1,430 in Mirpur areas.

Contacted, Beximco LPG Chief Commercial Officer M Muntasir Alam said Beximco was selling LPG at the BERC-fixed rate and also bore the transport cost of their distributors.

SHOW-CAUSE NOTICES TO TWO IMPORTERS

On July 11, the BERC issued two show-cause notices to two importers, United Aygaz LPG LTD and Totalgaz, for selling LPG cylinders at a higher rate to distributors in early July.

As of filing this report, none of the companies replied to the notices. A BERC source confirmed The Daily Star that Totalgaz sought more time to respond, but United LPG didn't reply even after the second notice was served on July 31.

SM Faruk Hossain, head of Brand, Communication and PR at United Aygaz LPG, said, they replied the BERC's July 11-notice, saying the distributor was not their own. "But later, we didn't receive any further notice."

Sobour Hossain, head of operations of TotalEnergies, told The Daily Star that he is not authorized to talk to the media.

TotalEnergies Managing Director AS Krishnan could not be reached as he had been abroad.

Talking about the issues, BERC chairman Nurul Amin said, "They [the two companies] are yet to respond to the show-cause notices."

"We will take action against them as per rule," he said, adding that they fix the dollar rate based on the rate the companies provide at the meetings.

"All the charges for transportation and taxes are factored in calculating the pricing of the LPG. Yet we don't understand why they don't follow it. It's an ethical issue."

Asked about the market monitoring, he said, "We need to depend on the consumers' rights protection directorate and the district administration as we have no executive power. We found that in some areas the fixed rate is not being followed."

Prof M Shamsul Alam, energy expert and vice president of Consumers Association of Bangladesh, said the businesses in this sector have a lot of clout, with which they control the market.

"They manipulate the market sometimes by reducing imports, sometimes by stocking excess inventory," he added.

As a quasi-judicial body, the BERC can take necessary action against the companies, he said. After a long judicial fight, the pricing authority was awarded to the BERC by the high court in 2020. "They are obliged to ensure the energy justice for consumers. They should force the companies to sell the product at a fixed price."

Besides, he added, the consumers should come forward to get LPG at a fixed rate. "They should collect the money receipts from the retailers and file complaints at the BERC."