Racketeers eat up Tk 50cr subsidy, pocket up to Tk 160cr a year by spiking prices
Sajjadur Rahman:

At a time when consumers are grappling with soaring prices of liquefied petroleum gas, unscrupulous traders with the help of some government officials are making crores of taka by selling subsidised LP gas at more than twice the government-fixed rate.

The racketeers not only eat up nearly Tk 50 crore in subsidies intended for consumers, but also pocket another Tk 128-160 crore every year by overcharging consumers.

State-owned Bangladesh Petroleum Corporation (BPC) produces 20,000 tonnes of LP gas a year, enough to fill 16 lakh cylinders with 12.5 kilograms of LP gas each. The gas is produced as a by-product at the Eastern Refinery in Chittagong and the Kailashtila gas field in Sylhet. The BPC has a one-fourth share in the country's LP gas market, according to industry players.

A cylinder of BPC-produced LP gas is priced at Tk 700 at the end-consumer level. But this subsidised gas is traded for Tk 1,500-1,700, almost the same prices charged by private companies.

“It is an open secret that no consumer gets the BPC-produced gas at the government-fixed price. In Chittagong, it is sold for a minimum of Tk 1,500 a cylinder,” said Fazlur Rahman, deputy general manager of LP Gas Ltd, a state-run organisation that packages LP gas before it is marketed by four other government companies.

“A ring of dealers and traders is depriving consumers,” said Rahman.

State-run Padma, Meghna, Jamuna and the SAOCL market LP gas for the government. LP Gas Ltd sells a 12.5-kg cylinder for Tk 631.5 to the marketing companies that sell it to dealers for Tk 679.5. The dealers can charge consumers a maximum of Tk 700 a cylinder, said Rahman.

The scam came to the fore recently following an unabated price spiral in LP gas -- by nearly Tk 500 per 12-kg cylinder -- in the last three months. The price has gone up to Tk 1,700 a cylinder. Private operators have attributed the price hike to rising LP gas prices on the global market.

Dealers and traders make a profit of Tk 100 from each LP gas cylinder of private companies. But they charge more than double the government-set price for BPC-produced LP gas. Allegations are rife that a section of dishonest BPC officials help them run the business.

“A section of unscrupulous dealers and traders eats up subsidy of over Tk 300 on each LP gas cylinder. Some BPC officials get a percentage from those dealers,” said a senior BPC official requesting anonymity.

According to the BPC, the caretaker government in 2008 decided to increase LP gas price to Tk 1,000 from Tk 600 a cylinder to cut subsidies. But dealers refused to buy LP gas at an increased price.

Soon after the Awami League government came to power, the price was re-fixed at Tk 850 a cylinder. But dealers rejected it. Later, the price was set at Tk 700 when private players were selling each LP gas cylinder for Tk 1,200-1,300.

BPC Chairman Abubakar Siddique said private operators were partially responsible for the price manipulation.

“They (private companies) have a role…they make a pact between themselves and hike the price.”

Dealers of both private and public companies take advantage of the big gap between LP gas prices charged by the BPC and private players, he said.

“Dealers rub BPC's name off a cylinder and sell it as a private company's product. We wrote to marketing companies last week asking them to warn their dealers. Otherwise, their licences will be cancelled,” said the BPC chairman.

Private players said the price of per tonne LP gas rose to $1,195 this month from $1,031 in February on the international market for the Iran crisis and soaring demand for LP gas in petrochemical industries.

Khizir Ahmed, general manager of Bashundhara LP Gas, said, “Buyers do not know that the BPC sells LP gas at a subsidised rate of Tk 700 a cylinder. Middlemen eat up the subsidy under the nose of the authority.”

BPC officials said some Chittagong-based dealers control the supply of BPC-produced LP gas cylinders and sell it to retailers at a much higher price.

Wahidul Alam Patwary, a Chittagong-based dealer, claimed that the supply of BPC-produced cylinders is inadequate, and it accounts for only two to three percent of the total supply in the market.

However, BPC now takes up 25-percent share of the LP gas market.

“Consumers see products of private companies all around,” said Rahman.

Syed Yusuf Hossain, chairman of Bangladesh Energy Regulatory Commission, said there should not be such a big gap between the LP gas prices charged by public and private companies.

“If the affected party does not inform us, we are unable to do anything.”

On the big price gap between LP and natural gas, he said everybody knows that LP gas is marketed because of a severe shortage of natural gas.

Habib Hasan, an LP gas user at Kathalbagan in the capital, said, “I do not know that the BPC produces LP gas, and its price is less than half that of private companies.”

Hasan has to spend around Tk 2,500 a month for LP gas for his three-member family, while his neighbour pays only Tk 450 for natural gas.