Friday, September 22, 2017

Privatised LPG not market rate: traders

Consumers say the privatisation of the liquid petroleum gas (LPG) market in August has not resulted in lower prices, with legally imported bottles of the cooking fuel costing the same as illegal imports.

The government previously imported LPG and sold it at a subsidised rate only to high level officials who would then resell on the market. The rest of the market was made up of LPG smuggled across the border from Thailand and sold on the black market.

But from August, the government granted four private companies – Asia World, Universal Energy, Union of Myanmar Economic Holdings Limited and Infinite Benevolence, who is still preparing to import – licences to import and sell the fuel as part of the government's ongoing privatisation of the economy.

A shop owner in Tarmwe township said that privatisation of the industry initially had no discernable impact on prices, with all four companies wholesaling LPG for K1500 a kilogram in August, the same price as illegally imported fuel.

Through most of September, large quantities of illegally imported LPG arrived in Yangon causing the illegal wholesale price to fall to K1200 a kilo, while retail was about K1400, he said.

Meanwhile, private companies only reduced their wholesale price to K1350 and on September 27 raised their prices back up to K1400 as the illegal imports began to dry up, he said.

Another shop owner in Tarmwe township admitted that while privatisation had so far little benefit for competitive pricing, it did at least ensure that prices would not skyrocket, which has happened in the past.

“When no private firms were allowed to import and there were shortages caused by problems at the border, we had no control over prices or supply. If we don’t like the price offered by the private companies we don’t have to buy from them,” said the shop owner who has been in the industry since 1994.

Retail price of LPG has levelled around K1680 between July and September, whereas in June the price rose to K2250 per kg, up from K1625 per kg in May and K1930 in February.

The Tarmwe shop owner said that based on the global market price of LPG, about US$790 a tonne in late September, the cost of LPG imported to Yangon, even when including import tax, would be about $1200 a tonne, or $1.2 a kilo.

“Using an exchange rate of K900, 1kg of LPG costs the importer K1080, so even if they sold it for K1200 a kilo they would be making a profit of K120,000 a tonne,” he said.

He added that by lowering the price below illegal imports the private companies could easily sell 2000 tonnes a month.

Another Tarmwe shop owner agreed that if the private importers dropped their prices they could destroy the black market.

“If it costs us K1180 a kilo to illegally import LPG and we can buy legally imported LPG for K1200 we’ll happily choose the legal option because it’s much safer for us,” he said.

He said the current situation, where a small number of companies effectively controlled the legal market was not healthy because they could still set prices.

The private importers are distributing LPG as far as Chin State and Tanintharyi Region.

A spokesperson for one of the importers said prices are stable and deliberately set at about the same level as illegal imports. He said the companies are new to the business but plan to order and import thousands of new cylinders from Thailand.

LPG currently imported into Myanmar is bought from South Korean firm Daewoo and trucked from China.