According to recent news, the price of a 12 kg LPG cylinder has been declining; with the price dropping to 1232 from 1297 after the Bangladesh Energy Regulatory Commission (BERC) announced a 65-taka reduction. And it was notified to apply in the market from 6th January 2023. Mr. Abdul Jalil, Chairman of BERC, announced during a virtual press briefing that the price of other sizes of LPG cylinders—from 5.5 kg to 45 kg—would also be reduced on a rational basis.
Reports have been found that the retailers mostly in the urban areas are not maintaining this pricing policy, given by the authorized body. Different pricing policy has been found in parts of Dhaka city, ranging from 1500 to 1700. It was picked at 1800 at some places like Moghbazar, too.
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The consumer experience regarding buying LPG gas cylinders is just what we can apprehend. They have to buy cylinders at a large price, about 300-400 more than the base price fixed by the authorized body. Things are disturbed not only in Dhaka. Many news report suggests that the price is demanding higher in other major cities of the country too, like Chattogram, Rajshahi, Khulna, etc. The hiked price is ranging from 1300 to 1650 there.
Why the price is skyrocketing?
The world market has been experiencing price hikes and inflations everywhere due to several reasons like the Russia-Ukraine war, sanctions on Iran’s gas distribution, Covid-19 breakdown, middle-east political turmoil, etc. Alongside all these points, while searching for some other reasons behind the price rise of LPG gas cylinders, the retailers gave excuses of dated pricing methods and supply shortage.
The dated pricing policy is the method in which retailers follow the prices given in the body in a stickered print. So, if a retailer has bought the product before the new pricing policy applies, then he has to sell the product at the given price of the sticker for the existing products. Otherwise, the retailer is the one who ends up losing points due to price deviations, in case of lowering.
On the other hand, a supply crunch is experienced when the producers don’t supply according to the prevailing demand for the product in the market. And due to excessive demand for the product, the market fails to meet the demand of the overall consumer society, and then this result in a supply shortage in the market.
The ultimate gainer here is the middlemen, who stock the products, and then serve them for sale at a higher price than the actual one. As the retailers have to buy the product from the middlemen at a higher price, they found no way to follow that step and sell at a new price, adding to the profit margin too.
Who is mainly responsible for the LPG price hike?
The effect of the rising LPG price is experienced by the elite class of society to the marginal people of the society. Retailers have to buy the LPG at about 300-400taka higher than the actual price. This, after adding their profit margin, goes up to about 450-500 for the consumers, who are the ultimate people to consume the product.
Thinking about the moving carts selling tea and other snuffs, the price rise of the LPG is giving them huge hazards while maintaining the regular price. A cup of tea that is priced at 10 taka is tough for the owner of the carts to maintain that price, as the average price goes higher because of the extra 500 taka addition of the LPG cylinder price.
So, who is mainly responsible for this problem? Asking the mass people, reports have been found that some are blaming the middlemen, and some others are blaming the improper distribution cycle of the product. The government is also blamed for the subject of incompatible pricing methods. Companies are saying that the supply-chain is hugely disrupted as they are not been able to open LCs, a document used to get loans in case of importing goods. And the middlemen are taking all the benefits by stocking and raising the price.
The overall market of the LPG gas cylinder is cartelized by some groups, as about 99% of the overall LPG gas cylinder market is under the control of 29 private companies. So these companies are taking all the chances to enhance their profit ratio using the market ratio. Implementation of a level playing field and excluding the barriers (if any) to enter into the market can play a big role in addressing this carte issue.
How Can these problems be addressed?
The supply crunch and dated pricing problems are mostly public-created factors. The middlemen or the body engaged in these works sometimes stock the products for a higher price, or the company from which the product has been bought is not taking returns of the product priced in an old model, for acquiring an enhanced profit margin.
But there should have policies according to which, the company will take the return of the product price in a different amount after announcing a new pricing policy by the authorized body, and then re-sticker the new amount. The issue can be addressed in this way easily. Plans can be implemented like, such products priced at an old ratio will not be allowed to sell in the market after announcing the new one, and the host company will be obliged to take that back and re-price the product by stickering on it once again.
Again, the shortage created in the supply of the product can be checked by the authorized body, whether middlemen are sticking products or not. If yes, then policies can be implemented to solve this problem and supply products to the market immediately. If it is for the unproductivity of the product, then a subsidy by the government can be incorporated into the pricing.