A probe team of Ministry of Industry (MoI) formed to investigate anomalies in the LPG market has confirmed that the practice of companies illicitly collecting competitors´ cylinders, changing their foot- and neck-rings and circulating them under their respective brands runs deep in the industry.[break]
The raid by Bureau of Standard on May 5 at Nepal Petroleum Trade Links in Biratnagar has for the first time exposed the biggest racket in this connection run by Sugam Gas Company (SGC). The MoI probe team confirmed SGC, which already has circulated 29,000 units of cylinders in the market, was tampering with another 15,314 cylinders of 24 different gas companies.
This is not just a one-off case that the probe team dug out through its investigation. And not just the private bottlers, even the state-owned Salt Trading Corporation that jumped into the LPG bottling business just recently was found involved in such wrongdoing.
“During our inspection, we found Nepal Cylinder Industry, a company based in Amlekhgunj, involved in similar practice -- fitting foot and neck rings of Salt Trading Corporation (STC) in cylinders that had logo of Baba Gas,” reads the team´s report.
The probe team has said it could not be sure whether STC was directly involved in this wrongdoing. But what is for sure is the tampered cylinders will find way into the plant of the STC, will be refilled and circulated in the market.
People involved in LPG bottling business agree that almost all gas companies are into this unscrupulous practice, even though they are well aware that refitting of foot and neck rings sharply deteriorates pressure bearing capacity of cylinders.
“Refilling gas into such cylinders makes them prone to leakage and explosion, and can cause fatal accidents,” admits Sabarmal Agrawal, president of Nepal LPG Industries´ Association.
Why are the companies doing so then?
First, it fetches handsome money. For a fresh cylinder received from a cylinder manufacturing company, the bottler needs to pay around Rs 2,000. If it collected others´ cylinders by exchanging them with its own cylinders, it can change foot and neck rings and market it under its brand at an investment of just Rs 300.
The straight away profit in the deal is Rs 1,700 per cylinder, said a former promoter of a gas company.
Apart from that, penetration of the company´s brand into the market by exchange and sudden permanent disappearance of competitors´ cylinders inflicts long-term business loss for rivals and gain for the company.
“This works perfectly well for all. Even the big companies today had penetrated into the market in this way. For the newcomers, resorting to this strategy is a must if they are to survive,” said the source.
Following the revelation of this alarming fact, MoI on Friday has decided to impose ban on cylinder manufacturing companies from supplying cylinder parts.
“Now cylinder manufacturers must supply complete cylinder and are restricted from supplying rings even to the concerned companies,” said Kamal Bahadur Thapa, a member of the MoI probe team.
The government has also decided to ask STC not to use cylinders manufactured by Nepal Cylinder Industry to make sure that the state-owned gas bottler does not circulate tampered cylinders. STC had recently ordered the company to supply 35,000 cylinders.
The MoI has taken a number of other decisions to safeguard consumers from the risks that tampered cylinders pose. But it has simply ignored the concerns over sub-standard cylinders already circulated in the market.
Urmila Shrestha, general manager of STC committed to Republica that the corporation will test the standard of cylinders already in circulation. However, despite conceding the wrongdoing, other bottlers refrained from making similar corrections.
“We don´t expect them to act properly even if they made commitment. Hence, we feel, the government must take a categorical decision in this connection,” said officials of Nepal Consumers´ Rights Protection Forum.
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