The National Petroleum Authority (NPA) is standing firm in its commitment to reduce operational costs for liquefied petroleum gas (LPG) traders.
This comes after concerns raised by the Liquefied Petroleum Gas (LPG) Marketers Association regarding an $80 per metric ton (MT) fee imposed on suppliers’ premiums.
The fee is specifically aimed at boosting investment margins for bottling plants and cylinder infrastructure.
Abass Ibrahim Tasunti, NPA’s Head of Economic Regulation, stressed the authority’s proactive approach in addressing industry challenges for long-term sustainability.
Tasunti pointed out innovative measures such as consolidating quantities among Bulk Distribution Companies (BDCs) to lower import costs.
“Taxes are what usually generate revenue for governments. So if governments can generate taxes from elsewhere, then they can consider reducing some of the taxes on a particular product or service. And that is the appeal we are making. The other thing NPA has done, whilst waiting for the government to respond to the call for a reduction of taxes, is to find a way to introduce innovative ways to reduce the cost of LPG. So we started discussing with the BDCs that, if you look at the way we used to import LPG, you could have a BDC paying a premium to the international oil trader, up to about $100 per metric tonne. So we thought that if we consolidate the quantities of the BDCs, bring it together, and we do open competitive tenders, we could bring down the cost.
“So we had these discussions, we planned it, and we started in January this year. The first tender that we did in January to deliver quantity starting from March, we got the premium at $30 per metric ton. This is a huge drop. And we see that this is an advantage for us. So with this huge drop in the premium, the cost of importing LPG, this introduction of the $80 per metric ton helps to make it easy to accommodate the price,” Abass Ibrahim Tasunti stated.
This strategic move has resulted in a significant reduction from $100 to $30 per metric ton through competitive tenders, making the $80 fee pivotal in facilitating price adjustments.
The NPA’s actions demonstrate a strategic response to industry demands, ensuring a conducive environment for LPG traders amidst evolving market conditions.
The Liquefied Petroleum Gas (LPG) Marketers Association voiced its concerns regarding the government’s approach to boosting LPG consumption, cautioning that the continual introduction of taxes could impede this objective.
Their statement comes in response to the National Petroleum Authority’s (NPA) recent imposition of a new tax on LPG as part of the revised pricing structure, effective April 1, 2024.
The Association strongly criticized this move, particularly condemning the addition of $80 per metric ton (MT) as part of the suppliers’ premiums, specifically designated for Bottling Plant and Cylinder Investment Margins.
They argued that this imposition was unjustifiable and indicated the Authority’s disregard for the decline in consumption since 2021.