LPG price fixed by regulator unrealistic, says Energypac MD

Established in 1995 Energypac Power Generation Ltd is a pioneering engineering company that helped form the backbone of industries, by providing technology with purpose to make manufacturing cleaner, infrastructure more energy efficient, provide access to clean energy, and transit smarter and healthier for the planet.

Energypac is now deemed as a top power engineering business dome in Bangladesh. After its success in engineering products and technology for around four decades, the company has expanded its wings to other sectors also. In recent years, the company has entered into the LPG cylinder and bottling business. But the move of the energy regulator in fixing the retail price has irked the businesses in the sector, especially the smaller and newer ones.

In an email interview with the Business Insider Bangladesh, Energypac Managing Director Humayun Rashid shared his detailed views on the LPG sector in Bangladesh. He also shed light on the overall energy situation including renewable energy in the country. His interview excerpts are given below.

Business Insider Bangladesh (BIB): The government is emphasising on increasing the use of LPG rather than natural gas, especially in the industrial sectors. The decision has been taken keeping the scarcity of natural gas in mind. What is your viewpoint towards this decision?

Humayun Rashid (HR): There is no doubt that we are running out of natural gas, so we have to reduce our dependence on natural gas. On the other hand, the LPG sector is now a growing industry, if the use of LPG increases especially in the industrial sector, it will help the LPG sector flourish. With the increasing use of LPG, the sale of auto-gas will go higher, too. And being environmentally friendly, we can reduce the rate of carbon emission and save our environment from being polluted. But we should also keep in mind that with increasing use of LPG, we will need adequate infrastructure.

BIB: The Bangladesh Energy Regulatory Commission (BERC) has recently fixed the retail prices of LPG for private companies. How do you think this will affect the industry? What do you think should be the ideal price of LPG for the private sector?

HR: The Bangladesh Energy Regulatory Commission has taken lots of positive initiatives to facilitate the LPG sector. However, pricing is one of the most important indicators that determine the stability of the LPG industry in Bangladesh. The first problem with the price fixed by the BERC is that they have calculated the price in consideration of last month’s CP (contract price) price. The calculation factors such as cost of finance, interest variables, transportation cost, and the cost required for investment by the dealers and distributors, minimum profit facility of the retailers – all of it must be taken into account while fixing the price. Considering all these, it can be said that the monthly pricing has been fixed by BERC ignoring all the above key factors is not realistic and justified.

BIB: What are the challenges that the LPG sector is facing now?

HR: The biggest challenge here is our inadequate infrastructure to receive deliveries from large LPG ships due to our lower river draft. This adds to the LPG import cost, resulting in higher market price. Furthermore, as LPG is mostly imported to Bangladesh, the initial challenge is the monthly international price fluctuation. When the price tends to increase, it becomes difficult for the operator to keep the old price; on the other hand, the market is not ready to accept the new higher price. Natural concerns like fog, flood, etc. sometimes can delay transporting cylinders. Lastly, cross-filing is the most alarming concern in quality control and safety check of LPG products.

BIB: What do you think the future of the energy and power sector will look like?

HR: Bangladesh’s power and energy sector has made tremendous progress to cater to the demand of electricity over the last decade. The sector has made a great contribution to the overall GDP of Bangladesh. The sectoral contribution to GDP has increased by 16.3 percent per year which is very remarkable. However, we have many projects underway in the country, such as Matarbari power plant, Payra coal-fired power plant, and Rampal coal-fired power station. When these power projects come into operation, it will increase the reliability of power in our country. With the completion of these projects, the government will be able to ensure an uninterrupted stable supply of quality and reliable power for the citizens of the country in the near future. This is the future I am foreseeing for the energy sector of Bangladesh. Hence, in the light of those projects, it is expected that the power sector will move towards the production of more renewable clean energy.

BIB: The world is moving towards a more renewable approach to energy. But in Bangladesh, the approach is still based on fossil-fuel. What is your opinion on this, and how can Bangladesh shift towards using renewable sources as well to meet its energy needs?

HR: There is no denying that Bangladesh, as well as the whole world, will remain dependent on fossil fuel for the next 20 or 30 years. Since Bangladesh is an agriculture-based country, we don’t have abundant lands which are required for solar energy. The government still has a commitment to address at least 40 percent of total energy needs through renewable energy by 2041. The government, in the meantime, is trying to produce renewable energy in chars and other areas inappropriate for agricultural activities. I think this shifting will eventually happen, but it will take time.

BIB: What steps do you think can be taken to promote and develop renewable energy?

HR: Energypac is working with renewable energy and is more active on issues related to energy savings and efficiency. But we don’t have abundant lands required for solar energy as most of the lands are being used for agricultural purposes. There is no denying that Bangladesh, as well as the whole world, will remain dependent on fossil fuel for the next 20 or 30 years. Government has properly addressed and balanced all kinds of energy needs, including energy security, to make the dependency shifting from fossil fuel to clean, renewable energy. Bangladesh can focus on rooftop solar energy and a massive job has been done by IDCOL for remote villages. We have to map out future plans keeping alternate energy and ways of exploring new sources of energy in mind, and we have to increase dependency on alternative energy. The importance of establishing solar panels cannot be denied too. So that the rural people can also have access to electricity and change their lifestyles. Besides, developing clean and renewable energy will also help Bangladesh meet the SDGs.

BIB: What are the challenges currently being faced by the energy and power sector of Bangladesh?

HR: We have to address the persisting power generation issues so that we can ensure quality power transmission and distribution going ahead. Along with better power and renewable energy, improved transmission and distribution facilities to make the energy sector more stable in the days to come. Otherwise, someday energy supply may get disrupted all of a sudden. The government needs to plan beforehand to avoid such a situation.

BIB: Bangladesh is set to achieve 100% electrification this year. Do you think the country can meet the electricity demand — both in terms of quantity and quality?

HR: This is great news for us that Bangladesh is all set to achieve 100 percent electrification. Once it’s completed, then the light of civilization will reach the population of the whole country. The light of education, culture, automation, and innovation will benefit even someone from the rural backwater. Consequently, future generations and the country will move forward. However, in many places of our country, there are problems such as low voltage, power cuts, and lack of reliable power supply. To be particular, many factories are suffering due to maintenance problems. We need to install locally-manufactured equipment to reduce this kind of problem. Only then, the reliability will increase.

BIB: What are the challenges businessmen face in terms of investment? And what kind of cooperation do you think they need from the government’s side in this regard?

HR: The world is now facing a difficult time due to the pandemic and the economy of the world has also got affected by it. But the recovery rate of our country is very praiseworthy despite having all the difficulties and it has become possible because of the timely decisions made by the government. However, we need some improvements in some fields to acquire the ease of doing business. We need reformation in the bureaucracy as far as investment and FDI are concerned. If it can be reformed, then we can attract investment in the private sector. We want the government to take steps to improve the processes so that a young investor does not have to run from one office to another for the license. Unless improvements are made, then the reforms taken by BIDA will go in vain. If our government becomes more private-sector friendly, simplifies these processes, introduces one-stop service and addresses the ease of doing business, we will feel encouraged to make investments.