The Bangladesh Energy Regulatory Commission (BERC) has recently rejected the LPG operators association of Bangladesh (LOAB) demand for higher price of liquefied petroleum gas (LPG), an official said.
The LOAB said BERC set retail price for LPG on April 12, which was unreasonable and one-sided. However, BERC claimed the price is logical and realistic.
The LOAB letter noted that many of their sector costs were not taken into account when the BERC announced the LPG price. Of these, operator profit is Tk 89, and distribution cost, Tk 25. Besides, the profit of the dealer and the retailer has been fixed at Tk 24 and 27 respectively, which is not realistic. The overhead cost has been fixed at Tk 23 instead of Tk 143.
The LOAB wanted a total cost of Tk 481, where the BERC approved Tk 194. In order to maintain the existence of the LPG industry, the declared price of a 12 kg cylinder should be increased at Tk 287 with Tk 975.
BERC has rejected the proposal and sent a letter to LOAB where it said that if the commission was added to the claimed additional price at Tk 287, the price of a 12 kg cylinder will be Tk 1262. The Commission thinks that this price will not be reasonable and realistic.
The commission said the pricing policy was followed by the BERC's technical evaluation committee. Apart from this, the latest audit report submitted by LPG operators has been taken into consideration as the basis for fixing LPG bottled and storage charge at Tk 143 (12 kg).
Expenditure has been added in 6 sectors in total. Manufacturing overhead cost considered at Tk 22, sales, distribution administrative cost is at Tk 46, depreciation is Tk 42, loan interest is Tk 23, profit is Tk 15 and corporate tax is considered at Tk 5.
It also said in the letter that before the price announcement in April, the market was checked and it was found that LPG was sold at taka 930 to taka 980 per cylinder at the consumer level. In addition, the commission has been able to reduce VAT by 15 per cent in three steps in consultation with the NBR. It has been reduced to 5 per cent at the new level of storage and bottling and 2 per cent VAT at the business level.
The BERC also said LPG is currently being sold in the market at a much lower price. But after announcing the price, it is quite mysterious to ask for more. Operators will get new additional benefits as VAT is reduced.
Commission member, Md. Maqbul-E-Elahi Chowdhury said, “We also used the indicator that LOAB used in LPG pricing. LOAB claimed that the operator's profit and the distributor's profit were not addressed, which is not correct. I would request them to take a good look. These have been addressed. Their indicators are no different from our indicators."
On April 12, the energy regulator fixed the retail price of 12.5 kg bottled LPG marketed by the government at Tk591, and the price of the 12 kg LPG sold in cylinders by private companies, at Tk975.
It has been decided that the LPG price will be adjusted every month based on the Saudi Contract Price (CP) of Propane and Butane. Propane and Butane are the two components of LPG, which Bangladesh imports from the international market.
To this end, BERC is working to set a new reduced retail price of LPG and likely to announce it at the end of the current month. The new price will be effective at consumer level from May, sources said.
In March, the CP was $625 and $595 per tonne of propane and butane, respectively, which has dropped to $560 and 530 this month (April). Price of Propane dropped by taka 5,512 per tonne ($84.80). On the other hand, the price of butane has also decreased at the same rate. On an average, it has decreased by about taka 5.5 per kg. So, it is expected that the price of an LPG cylinder (12 kg) may be reduced by taka 65, sources said.