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Govt mulls subsidy to popularise LPG

By UNB, DHAKA
08th-Apr-2015       
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The Energy Ministry has been studying different possible options to provide subsidy to the LPG (liquefied petroleum gas) sector to popularise it and make it more accessible to the people living in the areas having no pipeline-gas network.
According to official sources, the new move came against the backdrop of the government's plans to limit the use of pipelined gas by replacing it with any other alternative.
The idea has captured policymakers' minds following the recent hearing of the Bangladesh Energy Regulatory Commission (BERC) on the state-owned gas distribution companies' proposals to raise the gas price.
As part of the government decision, the gas distribution companies came up with the price enhancement proposals to the energy regulator, but failed to justify or show a valid ground in their favour as all of them are operating businesses with substantial profit.
It was found in the hearing that if the gas price is raised, the additional income will go to the pockets of the companies' private shareholders, companies' staffs and also to the government exchequer.
But as per BERC law, natural gas is a national resource which is absolutely owned by common people of the country. So, BERC cannot allow the gas companies to sell the country's natural resource and make exaggerated profit or let it go to the pockets of any particular stakeholders.
After arguments and counter arguments, finally there was verbal consensus among the participants representing the consumer groups and the gas distribution companies that the gas price could only be raised if it is ensured that the addition money will go to those people who don't have access to pipeline gas.
They also insisted that the additional money will be spent as subsidy to lower the cost of energy of the non-pipelined consumers to reduce the disparity between LPG consumers and pipelined gas consumers.
A pipeline gas user needs to spend now Tk 400 per month while an LPG user has to spend more than Tk 1500 per month.
Specially, the representatives of the Consumers Association of Bangladesh (CAB), different political parties and also experts categorically said that there should be parity between the energy costs of urban elites having access to natural gas and the rural masses having no such access.
Following such submission, the BERC initiated a move to promote and popularise the use of LPG. BERC chairman talked to the LPG importers and visited a number of LPG bottling plants across the country to learn about the whole process of its production and distribution.
"I have visited a number of LPG plants and then shared our ideas with the State Minister for Energy and Power to popularise and make the LPG more accessible to the people through giving subsidy," said BERC chairman AR Khan.
He also said that the Energy Division was requested an effective mechanism for distributing subsidy to the LPG consumers.
Following the BERC move, the Energy Division sought proposals from the LPG importers and producers to examine different options for the matter.
Prime Minister's Energy Advisor Dr. Tawfiq-e-Elahi Chowdhury told UNB that the government is thinking about a separate network which will effectively work to ensure the consumers' easy access to LPG.
"We're examining different options because it is still not clear as to how much money will be required for the subsidy," he told UNB.
Meanwhile, Azam J Chowdhury, chairman of East Coast Group (ECG), a major importer of LPG, informed UNB that all the LPG operators jointly submitted a proposal to the government with different alternative options to popularise LPG and make it accessible to the consumers.
The proposal reveals that currently 6 private companies are importing about 85,000 metric tons of LPG while the state-owned Eastern Refinery produces 12,000 mt and RPGCL produces about 6,000 mt.
On average, the country now consumes about 100,000 mt of LPG, which could go up to 475,000 mt in next 6 years with gradual increase by 75,000 mt every year, starting with Tk 400 crore as subsidy for the first year.
In that case, if Tk 500 is given as subsidy to a 12 kg LPG bottle, its price will come down to Tk 700, viewed as within the affordable range of the common man. Under this plan, the subsidy requirement will be Tk 700 crore in second year, Tk 1,000 crore in third year, Tk 1,300 crore in fourth year and Tk 1,600 crore in the fifth and Tk 1,900 crore in sixth and final year.
If the price of gas is raised by Tk 500 per double burner per month, the government can easily provide the money to the LPG as subsidy without any extra expense, claimed the proposal.
Azam Chowdhury said India and Thailand are now following two separate mechanisms to provide the subsidy.
"Indian one is a bit complicated, whereas the Thai one is very easy to manipulate. But Bangladesh can follow a mechanism in between the two or a coordinated one which will ensure a proper subsidy directly to the LPG consumer," he told UNB.
The East Coast Group chairman believes that the country's private sector has already built up a wide-ranging network to bring LPG to the consumers, and an investment of $300 million only would be good enough now to cover the whole country using this network.

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