The National Board of Revenue (NBR) has recorded a 45.76 per cent growth in VAT revenue collection from liquefied petroleum gas (LPG) cylinders at production and trading levels as natural gas supply crunch has boosted its demand in the country.
Due to a scarcity of gas supply in the capital during the daytime, many households do the cooking at late night or early morning while others buy LPG cylinders despite having gas connections, putting the consumers under more strains amidst soaring inflation.
The growing demand for LPG cylinders has helped the NBR collect around Tk 575 crore from it during the July-May period of FY2022-23, up from Tk 394 crore in the same period of last fiscal year.
During this period, domestic LPG cylinder manufacturers paid 5 per cent VAT at local production or supply stage and enjoyed more than 5 per cent VAT exempt. They also paid 2 per cent VAT at business stage. NBR reduced VAT from 15 per cent in September 2020 in a bid to encourage local production.
Consumers bought cylinders at an average of Tk 1,274 this FY, up by 13.64 per cent from an average of Tk 1,121 in FY22, according to the Bangladesh Energy Regulatory Commission (BERC) price announcement analysis.
However, local cylinder manufacturers will have to pay 7.5 per cent VAT at production stage in the upcoming fiscal year as per the proposed budget for FY24.
VAT for local manufacturers has been set at 7.5 per cent till June 30. BERC announced the new prices, saying that a 12kg LPG cylinder’s price has been reduced by Tk 161 for the month of June.
A retail consumer bought it at Tk 1,074 instead of Tk 1,235, including VAT, in the previous month of May.
Prices of LPG cylinders–from 5.5kg to 45kg–go down rationally, Chairman of BERC Md Nurul Amin said at a press briefing on June 1 at the BERC office in Dhaka.
According to BERC, households used 129 billion cubic feet natural gas through six distributing companies in FY22. It accounts for 12.87 per cent of total natural gas supply across the country.
Due to a shortage of natural gas resources, the government has discouraged domestic consumption of piped natural gas.
To fulfill households’ gas demand for cooking and other uses as well as reducing pressure on gas to produce electricity and continue uninterrupted industrial production, BERC issued licences to 43 companies until FY22.
In FY22, Bangladesh imported 5,01,170 LPG cylinders while manufacturers marketed 26,49,050 cylinders, according to department of explosives.
Currently, around 85 per cent of total LPG is used in household cooking purposes. According to BERC, per capita consumption of LPG in Bangladesh is one of the lowest (4 kg) in the region, which is 58 kg in Japan, 16 kg in India and 13 kg in Vietnam.
Bashundhara Group, Beximco, Omera, TK Group, and JMI Group are among the country's leading manufacturers of LPG cylinders.
Due to gas supply crunch, LPG demand has risen sharply. Apart from that now new manufacturers are setting up plants. So, if the country faces more natural gas shortages, LPG can meet consumers’ demand, insiders say.
"Either we want or not, the import of natural gas is costlier due to forex crunch and devaluation of taka against dollar. So, LPG is a good option to fulfill their demand,” said Azam J Chowdhury, chairman of East Coast Group, which owns an LPG cylinder production plant.
“The government should explore natural gas from marginal gas field through Bangladesh Petroleum Exploration and Production Company Limited and should not supply gas to inefficient factories. In such way, we can overcome supply crunch to some extent,” he said.
“The LPG industry expansion can help the country meet the demand for gas but VAT increase to 7.5 per cent will make LPG costlier and we have to face stiff competition in the global market,” said Azam J Chowdhury, also president of LPG Association of Bangladesh.
“BERC set the prices of LPG which had not set the prices earlier after 2009. The government should introduce input-output coefficient system to continue support towards industrial growth,” he added.
