March 12, 2008, 15:45
Liquefied Petroleum Gas (LPG) can be made cheaper and more accessible to the poor by cutting out middlemen and imposing a regulated monopoly, Parliament's Minerals and Energy portfolio committee was told.
The price could be reduced to around R10/kg from the current level of R22/kg, the Department of Minerals and Energy's Deputy Director General for Hydrocarbons, Nhlanhla Gumede, told the committee.
The department proposed that the country be divided into three zones in which a regulated monopoly was allowed. After gas was transported into these areas a company would be responsible for filling cylinders, taking them directly to consumers and collecting them.
This was part of the department's effort to increase the use of clean-burning LPG for heating and cooking and to draw low-income households away from unsafe and unhealthy energy sources like paraffin and coal.
Low prices not gauranteed
South Africa, unlike most other countries, did not have gas in its energy portfolio, said Gumede.
The National Energy Regulator's Ethel Teljeur however cautioned that low LPG prices could not be guaranteed.
"The drivers of LPG prices, the oil price and exchange rate, are outside the scope of price regulation, so you can't guarantee that the poor will have access [to it]," said Teljeur.
Teljeur said if people became more comfortable using LPG it would "hopefully" attract more investment in gas exploration.
Gumede said that from a refinery gate price of R6.90/kg one would arrive at a LPG retail price of R10.72/kg. This was after a transport charge of R0.70, wholesale margin of R0.50, a retail margin of R0.80, a distribution margin of R0.50 and VAT of R1.32 had been added. - Sapa
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