POST TIME: 23 July, 2019 00:00 00 AM
LPG cylinders getting sold as scrap, creates problem for industry

LPG cylinders getting sold as scrap, creates problem for industry

Against the backdrop of the country’s fast declining gas reserve, the government has initiated a strong move to popularise liquefied natural gas (LPG) by phasing out the supply of piped natural gas for household consumption. While household usage of LPG is seeing a steady rise, a vested quarter in the middle of LPG cylinder’s trade cycle is exploiting other ways to mint money off LPG cylinders: selling them as scrap. This practice has sparked a crisis of cylinders in the market and concern among LPG bottling companies.

The bottling companies said if the “utilitarian side” of a cylinder is going to be exploited by a vested quarter, the original importers will end up being the loser.

Besides, the overall LPG sector is going to be affected as very few companies in the country manufacture LPG cylinders locally and most of the LPG cylinders enter the country with high import bills. So, scrapping of cylinders into metal before the end of their lifecycle actually harms the country’s economy, said sector experts.

LPG is a mixture of propane and butane that becomes liquid under pressure, which can then be stored in pressurised containers for use. It is relatively new in Bangladesh and the market is still small.

The Independent obtained several photos and videos of scrapping of LPG cylinders into metal. Entrance into those scrapping factories is sort of restricted and people there do not want to talk about what is happening inside.

One such scrapping factory is Bismillah Traders, which is located in Sagarika of Chattogram. The Independent talked with one of its employees, Mohammad Nasiruddin, who said they typically purchase LPG cylinders at Tk. 26–40 per kg. “In the last few weeks, we stopped buying the LPG cylinders as the market price of scrap metal is fluctuating. There is nothing illegal about buying LPG cylinders. We buy those and melt them. We have a lot of clients including some large steel companies who buy such melted metals from us,” he add.

Talking with The Independent, Anup Kumar Sen, vice-president at Orion LP Gas, explained why there is a market for LPG cylinders as scrap metal. An imported cylinder of 12-kg-capacity costs a company Tk. 2,200 to Tk. 2,400 but it is being sold at Tk. 800-Tk. 900 just to attract new customers.

“The idea is that we will make up the loss with the money that we earn through the gas refill,” he said, adding that a consumer usually refills gas four times a year.

Anup also said the problem started in the last few years after a few new entrants entered into the market. “We, at Orion, import our cylinders at Tk. 2,200 per cylinder as we don’t compromise with our quality. When we provide those cylinders to the dealers who act as the

middlemen between us and the customers, we charge Tk. 800 cylinder,” he added.

“The loss we incur from the sale of a cylinder takes at least four years to make up by refilling gas. So we believe that a customer will stay with our cylinder for at least four to five years. The life cycle of the cylinder that we import is at least 1–15 years,” he said.

What happens is there are some companies who import or manufacture low-grade LPG cylinders and sell those at Tk. 500–550 to the middlemen dealers.

“They sell those in that price range to grab the market, but that creates a problem because an empty cylinder weighs 13 kg. If a cylinder is as scrap, it can fetch Tk. 520. A brass metal valve with the cylinder can fetch another Tk. 100–120. So, a middleman dealer gets Tk. 100–120 per cylinder by selling this as scrap,” Anup said.

Anup also said this prcatice creates a problem for the whole industry. “You have to understand that the purpose of LPG cylinder is not to be used as scrap metal, at least not before the end of their normal life cycle. If middlemen start selling those as scrap, then that creates a problem for the entire industry,” he added.

A senior official of an LPG bottling company, who preferred anonymity, told The Independent that fierce competition among the LPG manufacturing and bottling companies is partially responsible for this new unwanted usages LPG cylinders.

The official said to grab a share of the intensely competitive market, some companies offer better commission to middlemen dealers which prompted those dealers to sell LPG cylinders of other companies in the scrap metal market.

Terming this type of competition unhealthy, the official said that major LPG manufacturing and bottling companies should try to protect each other to take the sector forward.

The top 15 LPG bottling companies have already invested around Tk. 5,000 crore, collectively, in the sector. There are a total of 2.2 crore active LPG cylinders in the market. Around 70–80 lakh LPG cylinders get refilled each year.