Why LPG uptake is still low

Wednesday November 7 2018

LPG

Government exempted taxes on LPG but the combined cost of other accessories like cylinder and cooker remained well beyond the purchasing power of an average Rwandan household. PHOTO | Cyril NDEGEYA 

By JOHNSON KANAMUGIRE
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Lack of refilling sites specifically at the district level, and the high cost of devices is undermining efforts to increase the use of clean cooking methods particular in rural areas according to a countrywide Liquefied Petroleum Gas (LPG) penetration assessment by the Rwanda Regulatory Authority (RURA).

This, according to market players, is because the limited number of businesses involved in the LPG supply chain like the wholesale shops and storage facilities are mainly in Kigali and only a few are willing to extend their operations upcountry.

LPG distributors and retailers say they incur high operational and transport costs when delivering the products to provinces, and they pass on these costs to users.

Jean d’Amour Ntibitura, who runs an LPG wholesale company said most users choose Kigali and commercial centres because that’s where they get a relatively big number of clients on top of the proximity to storage facilities, which reduces their costs.

Lack of incentives

“It is hard for most of us to open shops in the provinces because of lack of incentives. Beside transport expenses, the cost of setting up a business make prices too costly since every expense incurred has to be factored in the price,” Mr Ntibitura told Rwanda Today.

“You find that even those retailing LPG in provincial towns have to travel back to Kigali when they have to do refills,” he added.

LPG retail distribution is largely done by service stations, independent distributors and supermarkets buying directly from wholesalers importing devices for distribution or those running storage and refilling facilities.

While RURA’s 2017/2018 assessment doesn’t give the exact number of households that switched to cooking gas this year, it shows the demand for LPG importation rose sharply from five million kilograms to 10 million kilograms in 2017/2018.

It based the penetration on information gathered through the supply chain across the country.

The rise has partly been attributed to incentives from the government to promote clean cooking technologies, and the entry of new LPG importers and distributors in the market.

The LPG market is currently dominated by nine operators who are involved in importation, transportation, storage, distribution, wholesale, and retail of the products largely imported from Kenya and Tanzania.

The Ministry of Infrastructure said demand for LPG, which is currently estimated at more than 10,000 tonnes per annum, is expected to increase to more than 240,000 tonnes by 2024.

RURA officials say this will require expansion of existing LPG storage facilities to ensure steady supply and also new ways to improve the supply chain.