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Stats: 2,274,488 members, 4,984,249 topics. Date: Sunday, 16 June 2019 at 09:46 PM
|RE- Cooking Gas Consumers Will No Longer Own Cylinders by Tufunky: 8:09pm On Jun 12|
This is in response to the Federal Governments' plan to remove ownership of LPG cylinders from individuals.
Recently, the Nigerian Government has proposed a ban in ownership of LPG cylinder by individuals.
They cite safety, affordability and penetration of the use of LPG as primary source of cooking fuel for Nigerians. It basically involves taking your LPG cylinder to a dealer, and instead of refilling your cylinder, you simply swap it for another cylinder of the same size. More or less the same way a coca cola dealership operates. They also plan to ban refill of gas cylinders at refill skid plants as we know them, because according to the Federal Government, those Skid plants were licensed to serve the autogas sector (to fill only cars and trucks that run on gas) and not for the refill of gas cylinders.
The model proposed is to refashion the LPG sector like the power sector- Power Generation Companies- Power Transmission Companies- Power Distribution Companies.
Here, it will be LPG Cylinder Manufaturers- LPG Refill Plant and LPG storage Companies- LPG Cylinder Swap Dealers.
The LPG Cylinder Manufacturer will produce the cylinder.
The LPG Storage and Refill Plant Companies will be licensed to refill gas cylinders brought by Licensed LPG dealers.
The LPG Cylinder Dealers will be called MDC's (Micro Distribution Centers). They will be licensed to buy cylinders (wholesale from the LPG Cylinder Manufacturers), own, maintain and refill the LPG cylinder from the Storage and refill Companies.
Current skid plant owners are to shut down their plants and become MDC's and resort to buying cylinders from the manufacturer to become licensed dealers as opposed to having bulk storage tanks.
However, having looked at the proposed policy, I have come up with more questions than answers.
First, If one of the aims of the proposed policy is affordability of LPG, and the LPG dealers in this model will bear the cost of buying cylinders (of various sizes) wholesale from the manufacturer, Maintaining the cylinder, incur loss or damage of cylinder by end user as well as loss to accident, purchase/maintenance/fueling of trucks to transport empty cylinders from his depot to the licensed refill companies etc, who bears this cost? It will not be expected that the dealer will absorb the cost. They will transfer that cost to the customer otherwise, what other way will they cover the cost of doing business. Their only source of revenue in this arrangement is the sales of the gas content in the cylinder. It will not be expected that the dealers incur all this costs while their cylinder swap cost will remain the same. If the argument is that people cannot pay for LPG cylinders, will it be the inflated prices by the dealers they can afford?.
Furthermore, the inefficiency of this method calls for concern. If the dealers are expected to buy cylinders wholesale from the manufacturer, what size category are they to buy. Cylinders have various sizes from 3kg to 50kg. What happens when a dealer runs out of a particular size category to swap to customers and it is illegal to decant (transfer gas from one cylinder to another) at their dealership. They have to run back to the refill companies to reload the exhausted category. The arrangement is made up of many assumptions as seen in the assertion in the second link above...“You would fill them at the refill plants that would be tied to you and exchange it with your customers because you know your customers already."
Secondly, on the issue of penetration in the use of LPG, what happens to those who already have functional LPG cylinders in their possession or in their shops. Will that be confiscated? Will the early adopters of LPG be the first casualties in this system. Will people who have imported LPG cylinders to the country, paid import duties and other taxes and obtained SON seal of approval, not be able to sell their wares? One of the most important concept in all of economics is property rights. It has been the driving principle of any capitalist economy.
Property rights is the ability of individuals to accumulate private property, secured by clear laws that are fully enforced by the state.
"private property rights and exclusive ownership by individuals rather than government is a desirable component in any country. There are several positive benefits derivable from private property rights. This view is backed up in the findings of the 2014 International Property Rights Index. According to the IPRI, countries with a high IPRI score are associated with high levels of household income per capita, receive more investment from foreign economic entities and have superior GDP growth rates compared to low IPRI scoring countries."
Not knowing what the future holds with regards to his property, no individual or company will choose to invest in an environment where there is no protection of their property rights, or where the threat of loss to such a right exists.
What incentive will someone who has spent millions to invest in an LPG skid plant only for his life's investment to be destroyed in an instant by a policy? What incentive will that individual have to return to the LPG business? The government expects them to reinvest more millions to become MDC's.
When more skid plants shut down and there are not enough MDC dealers to fill that gap, what hope do we then have for penetration of LPG use in Nigeria.
LPG cylinders are of various types... Steel, aluminum, composite and even plastic types. Will the government expropriate my light aluminum and composite type cylinder and swap it for heavier steel cylinders. Where does consumer choice come in? Are we stuck with government only approved options? Will my current cylinder be declared illegal or would I be forced to pay for a new government approved cylinder?
Will the purchase of many LPG cylinders by dealers not be cost inefficient as opposed to storage tanks? Will that inefficiency not be a bigger barrier of entry into the LPG business thereby limiting penetration in LPG use in Nigeria?
What happens if my cylinder dealer in this proposed system runs out of gas cylinders to swap, then I visit another dealer and that dealer charges me more than regular price to swap his cylinder because I'm not their regular costumer?
Lastly, on the issue of safety, will it not be better to go with the skid plant method that has produced the results in the system so far, but giving them more rules, obligations and powers to guide their operational practices?
For instance, we already have 2 gas cylinder manufactures in the country with the ability to meet local demand. Why not ban the importation of LPG cylinders to Nigeria, then regulate the production processes of these producers to meet international best practices? On the other hand, give the skid plant operators the power to subject questionable cylinders to pressure/burst/leakage tests and confiscate cylinders that fail to meet the pass requirements of such tests. It will cost less to acquire LPG cylinder burst/leakage machines than the overhauling of and or shutting down of skid plants. OK they won't test the cylinders you say... That they just want to sell their products. What then will stop an MDC dealer in the new system from recycling a defective cylinder into the market in order to avoid the cost of maintaining the cylinders. Or what stops an MDC dealer from filling some cylinders from the filling plant, then decanting some of the content into other empty cylinders in his dealership, while swapping an unfilled cylinder and having the customers pay the price for a full cylinder.
This is different from skid plant scales which shows the level of gas in the cylinder.
I am not saying that the use of LPG and its paraphernalia should not be regulated. I'm simply saying that the policy should be drafted in such a way that improves upon the process that has been proven to work.
I will appeal to the Federal Government to let market forces decide our LPG development as (A) Market forces decide the prices of cylinders (2) A free market will enable more LPG investments in the sector. (3) It will determine the nature, variation and quality of cylinders people want.
If government wants to deepen penetration in the use of LPG, they have the option of subsidizing LPG, or buying LPG cylinders in bulk (from the manufacturers in Nigeria) and distributing to citizens freely or at a subsidized rate. This way, local manufacturers are patronized and more people begin to use LPG. Or by including the LPG recirculation and swap models to the already existing method but with improved operational regulatory procedures imposed on both methods with regards to the revalidation and recirculation of LPG cylinders and their safety standards. This way, both methods can be tested for effectiveness and also allows government to explore and exhaust as many processes as possible to maximize penetration in LPG use while ensuring safety in the service provider's environment.
Removing ownership of cylinders from people limits the sales of LPG cylinders to the limited purchasing power of the proposed MDC's, reduces the job creation and business opportunities that could come from the sales of locally manufactured cylinders, which in turn limits sales output of our local manufacturers. We are at a time when our manufacturing abilities are about to be harnessed. Honest feedback from the customers to the manufacturers of the LPG cylinders will enable them develop breakthrough products and technologies that can be widely adopted locally and be internationally competitive.
Any policy being drafted should be done in such a way that creates improvements in the LPG sector as opposed to one that may have a lot of unintended consequences and reverse the progress made so far in the sector.
PS. if you want to know who is driving this policy, find out who get to benefit from this new system.
I hope I have made some sense.
|Re: RE- Cooking Gas Consumers Will No Longer Own Cylinders by legendine(m): 8:38pm On Jun 12|
Can someone just summarize this for me
|Re: RE- Cooking Gas Consumers Will No Longer Own Cylinders by alizma: 9:35pm On Jun 12|
The whole summary be say, federal government go soon rebrand method of buying cooking gas. That one be say no body go claim ownership of a particular gas cylinder, watin go dey happen be say, when your gas finish, you go carry the cylinder go where them go give you another already filled cylinder of the same size. The government plan na to help reduce risk of cylinder explosion.
To achieve this, government go restructure gas sector like power holding where some people dey generate, some dey transmit and others dey distributor.
But OP come dey talk say plenty question dey for the matter. If you won know the plenty question for the matter, read the post
|Re: RE- Cooking Gas Consumers Will No Longer Own Cylinders by nwanyionitsha: 9:42pm On Jun 12|
|Re: RE- Cooking Gas Consumers Will No Longer Own Cylinders by legendine(m): 7:02am On Jun 13|
Bros u too much
Abeg na Radio station u dey work?
U smell warri or benin
|Re: RE- Cooking Gas Consumers Will No Longer Own Cylinders by alizma: 8:12am On Jun 13|
legendine:Na Mercy Johnson people them o, smell am again you go see say na them
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