What are the Challenges & Opportunities in the LPG Market in Bangladesh?

Among the developing countries, the economy of Bangladesh is growing at a rapid pace with a growth rate of 7.2%. LPG tank manufacturers are in demand to push the LPG demand in the country.The demand for LPG has increased at an exponential rate of 60%. The reason for this sudden rise is the suspension of natural gas connections in the country. But along with opportunities there are numerous challenges for the LPG market in Bangladesh.

Challenges in the LPG market in Bangladesh:

At the moment, Bangladesh has a LPG supply capacity of 4,00,00 MT/year which is way less than its enormous demand of 1.5 million MT/year. In the next five years, experts estimate a 400% growth in the LPG sector in Bangladesh. Although there are government initiatives to support the LPG industry, the biggest challenge to the LPG market is that the supply cannot keep pace with the demand in the industry. It will take time for investors in the LPG space to set up the infrastructure and reach out to all the areas where there is demand. A plan for LPG tank installation, LPG filling stations installation,LPG bottling plant, LPG service lines and other details to transition from CNG to LPG is necessary for carefully tackling the challenges faced by the LPG market in Bangladesh.

Opportunities in the LPG market in Bangladesh:

Initially, the Bangladesh government served its people with CNG which also included import of fuel to meet the demand in the country. But now natural gas has become scarce and costly. It will be completely depleted by 2022-2023 if new gas supply capacity isn’t added to meet the increasing demand for fuel. In the recent years, in view of the growing energy concerns, the regulatory authorities of Bangladesh took decisions to promote LPG consumption in the country.

According to an industry report, the energy division of Bangladesh estimates a gas demand of 8,000 MMCFD by 2041. Hotels and restaurants are one of the major energy usage sectors in Bangladesh. CNG will not be available for long for this sector as well as other commercial use sectors such as agriculture, lighting, metal and more. LPG will be the ideal clean alternative for catering to energy demand for commercial applications.

Some of reasons that have led to opportunities in the LPG sector are as follows:

• Rise of entrepreneurs in the country

Economic growth, higher literacy levels and women empowerment has led to more and more entrepreneurs in Bangladesh.

• Wealthy population with increase in the income

As per statistics, the per capita income of Bangladesh is expected to increase to US$ 1,752. The growing income is turning Bangladesh in to a middle-income country. LPG will become affordable for the financially secure citizens of the country.

• Increasing use of LPG as an auto fuel

In Bangladesh, more than 1,000 auto gas station licenses have already been awarded by the government to promote the use of auto fuel. The target is to convert 2,50,000 vehicles into vehicles running on auto gas.

• Tax benefits

The Bangladesh government provides tax exemption on import of LPG. Also, LPG equipment can be imported to Bangladesh at 2% less tax than the normal tax rates.

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Challenges and Needs in LPG Sector

LPG Tank manufacturers and entrepreneurs who are part of the LPG industry are excited for its growth but are concerned about the challenges facing the industry as well. Economic growth in India is propelling the growth of the LPG industry in the country. There is a rise in the LPG filling stations installations and LPG bottling plant installation.

Today, the LPG industry is divided into industrial, commercial, transports and domestic segments. As per a recent report, Indian consumers use 21.2 million tons of LPG of which 90% is used as cooking fuel. In the midst of concerns such as global warming and sustainable energy needs, LPG is a clean gas which can have enormous significance in the country.

Some of the key challenges in the LPG sector are as follows:

• Correct Positioning

LPG is a clean burning energy that consists of 60% natural gas and 40% fossil fuels. Among other energy sources such as petrol, kerosene and diesel, the positioning of LPG should be that of a clean energy. The multiple applications of LPG as a green fuel or clean energy should be highlighted to promote its usage.

• Cost of storage, transport and distribution

To meet the demand in remote areas, the transport infrastructure should be in place. But there are still many regions where transportation costs for LPG is high and it becomes difficult for LPG service providers to manage the supply. LPG requires specialised equipment such as LPG tank installations to store it, package it and distribute it.

The returns from the industry should justify the investments for LPG service providers to open more LPG service centres and for more people to have easy accessibility to LPG. There is a need for initiatives that will make LPG businesses safe and sustainable for entrepreneurs and affordable for end users.

• Quality of alternate energy sources

Earlier, the quality of LPG was competitive compared to petrol and diesel. But research has improved the quality of petrol and diesel. The quality edge that LPG industry once had isn’t working for it anymore.

Switching pattern of fuel usage

Source:https://www.bharatpetroleum.com/images/files/DCPatraIJMRASept2017.pdf

• Transition for consumers

Consumers who have been using traditional sources of energy such as firewood, coal, and others need time to adapt to the use of LPG. Adequate awareness is required to educate these users about the benefits of LPG and the ways to safely use it. Awareness will help members of the LPG industry to tap into different markets and boost the growth of the LPG industry.

Competitive pricing, cleanliness and efficiency are determining factors for people to choose a specific energy for usage. Rising income and mobility between rural and urban areas also has an impact on the energy usage behaviour in the country. LPG Tank manufacturers and other businesses operating in the LPG sector along with industry bodies and government initiatives are trying to change the perception of potential consumers through promotional messages.

As per an industry report, in 2016-17, 33.2 million households were enrolled in to LPG usage in India through the Pradhan Mantri Ujjwala Yojana. Government initiatives like these have led to an increase in the LPG tank installations in India and are trying to ease the difficulties in the LPG sector. The LPG penetration into rural areas is changing the fuel usage behaviour in the country.

AEPL is a leading name among LPG Tank manufacturers in India. The company offers superior quality LPG vaporizers, safety valves, ball valves, vane pumps and more. For specialised LPG storage and installation needs, contact AEPL at sales@aeplglobe.in.