Proposal draws flak


A worker tests the connection between a gas cylinder and a burner at a shop in Tongi yesterday. The finance minister in his budget speech on Thursday proposed raising seven percent customs duty on gas cylinders meant for household use. Photo: Anisur Rahman

The price of imported cylinders of LPG (cooking gas) will go up by around Tk 200 each, as the government has proposed raising duty on cylinders in the new budget.
According to the proposal, customs duty will be hiked to 10 percent in fiscal 2013-14 from present 3 percent on an LPG cylinder below 5,000 litres.
Finance Minister AMA Muhith said the move had been made to encourage local manufacturers.
A 12.5-kg (30 litres) cylinder now costs Tk 2,000, and a consumer can use it for 10 years.
If the proposal gets through the House, users, especially new ones, have to bear additional costs for the increase in customs duty.
Market players, however, said the decision would not only put extra burden on consumers but also force them to use locally-made low-quality cylinders that have shorter lifespan than the imported ones.
“We will be thrown into an uneven competition. Prices of our cylinders will be higher than those of Bashundhara or Jamuna that produce both cylinders and LPG as well,” said Saidul Islam, general manager of Australian company Kleenheat Gas.
“Quality cylinders are not produced in Bangladesh, and companies like ours don’t want to buy these products from local market because of safety issues,” said a high-up in Bangladesh office of French company Totalgaz.
Industry insiders said Bangladesh’s annual requirement of new LPG cylinders is 200,000. Of those, more than 100,000 cylinders are imported by two foreign companies — Totalgaz and Kleenheat. State-owned Bangladesh Petroleum Corporation also imports 10,000-20,000 cylinders a year.
Local companies Bashundhara, Jamuna Spacetech and TK Group produce cylinders. More companies, including MJL Bangladesh, are likely to enter the market next year. Sales of locally-made cylinders are on the rise for crisis of natural gas.
“We lack expertise in producing quality cylinder,” said a top official at BPC’s LPG plant in Chittagong.
Azam J Chowdhury, chairman of East Coast Group, which is set to produce LPG cylinders commercially from next year, was unhappy at the government move to raise duty on cylinders at the moment.
“It can be done next year, as the country doesn’t have the capacity to meet the demand for LPG cylinders. Their prices will go up now,” said Chowdhury.
Chowdhury also criticised the government for what he called a dual policy. He said the government was encouraging the use of LPG in households, and at the same time, it was also giving new connections of natural gas.
Liquefied petroleum gas or LPG, which is considered a safe and eco-friendly fuel, is derived from both crude oil and natural gas. Apart from domestic consumption, LPG is used as an efficient source of energy in various industrial and commercial applications. But it costs several times more than natural gas and 20 percent higher than kerosene.
Belayet Hossain, managing director of Jamuna Spacetech, and Tareq Mahmud, director of TK Group, ruled out the claims that locally-made cylinders are of poor quality.
“We produce cylinders by importing brand new steel sheets, and the product is certified and checked by government agencies,” claimed Mahmud.
But importers buy reconditioned cylinders from China and Malaysia, he said.

Source: The Daily Star