Economy

IndianOil is now sourcing LPG for North East from Bangladesh to save transportation cost

Pratim Ranjan Bose Guwahati. March 13 | Updated on March 14, 2020 Published on March 14, 2020

If you are in Tripura, chances are there is a bit of Bangladesh in your food. Because, IndianOil (IOC) is now sourcing LPG or cooking gas from Bangladesh to save cost of transportation all the way from Haldia Port in West Bengal.

India imports half of its 25 million tonne LPG requirement. The eastern and northeastern States are catered through imports at Haldia. As in December 2018, the subscriber base in the northeast stood at 81 lakh, covering over 80 per cent of the households.

Since majority Indian users get cooking gas at a subsidized price, lower transportation cost will result lower subsidy per cylinder.

The savings are substantial. IndianOil is importing bulk LPG from privately-owned Omera Petroleum and Beximco Petroleum of Bangladesh, covering a distance of barely 250 km. This is a fraction of the 1640 km road distance from Haldia to Agartala via-Siliguri Corridor.

Road movement through Siliguri is particularly costly due to use of smaller vehicles beyond Guwahati, to negotiate the hilly terrain.

Trial run

Formally launched by Prime Minister’s of India and Bangladesh from Delhi on October 5, 2019; the project took off on a pilot basis on December 19.

Since then, two road tankers of 18 tonne capacity each, delivering bulk LPG to Bishalgarh bottling plant of IOC, in Tripura, everyday; meeting substantial part of the demand in the far Northeastern State.

Bishalgarh plant has capacity constraints. Imports from Bangladesh to go up by five to six tankers, a day, with the competition of a bigger facility near Agartala that may cater part of the demand in Silchar, the second largest consumption centre in Assam.

Tolling opportunity

While lower transportation cost brought savings to IOC; the company exploring means to reduce the costs.

Bangladesh imports its entire LPG requirement through imports. In the past such imports were done from South East Asian destinations.

Due to lower freight opportunity, majority Bangladeshi imports are now made through an offshore facility, near Dhamra Port in Odisha. However, due to their small parcel size, Bangladeshi imports are costlier than in India.

IOC feels, costs can be reduced further if it is allowed to export LPG to Bangladesh, through Mongla Port, for processing and re-export to Northeastern States. Some port-based facilities in Mongla (Bangladesh) expressed interest in the proposal.

However, any such operation would require the Centre to lift embargo on LPG exports.

IOC also entered an MoU with Bangladesh Petroleum Corporation in 2016 to set up a LPG terminal, in joint venture, at Chittagong. The proposal didn’t see much progress as BPC couldn’t offer land, suitable to build a deep draft terminal that can accommodate large carriers.

IOC is now negotiating with some private operators for suitable opportunity.

Expanding services

While the proposal for LPG terminal and/or tolling facility is still on the drawing board, IOC is exploring the possibility of expanding the scope of current arrangement to more northeastern States.

Since Bangladesh shares nearly 2000 km boundary with the northeastern States of Tripura, Assam, Meghalaya, Mizoram etc; theoretically there is scope of import of bulk LPG and even bottled LPG from Bangladesh.

However, such an arrangement may also require relocation or reorganisation of the existing depots and bottling plants, which were built on completely different transport logistics considerations.

Transport of LPG from India to Northeast through Bangladesh using the recent extension of the inland water transport protocol is also a possibility. However, that will not happen before the Sirajganj and Daikhawa river-route in Bangladesh is opened.

The route is now heavily silted. Dredging operations with 80 per cent financial support from India is currently in early stages of implementation.

Published on March 14, 2020
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