Rwandan households slow to switch to gas despite tax incentives

Saturday December 19 2015

Liquefied petroleum gas (LPG) in non-explosive cylinders is now on the Rwandan market. PHOTO | CYRIL NDEGEYA |

Despite a significant drop in the price of liquefied petroleum gas (LPG) as a result of heavy tax incentives, households are still sceptical about switching to this type of clean fuel for cooking, putting pressure on forest cover.

It therefore remains uncertain whether there will be a significant reduction in the use of charcoal and firewood as the main source of Rwanda’s domestic energy needs.

An analysis of retail prices of a kilogramme of cooking gas over the past seven years shows they have dropped by 67 per cent per after the government intervened on the demand side by scrapping import duty on the gas and its accessories.

Scrapping the import duty and growing competition in LPG supply has resulted in the prices dropping to Rwf1,334 per kilogramme from Rwf4,000 in 2008, an indication that the gas is now affordable.

The subsidies brought down the cost of a cylinder from Rwf40,000 to Rwf28,000.

But despite the incentives, consumers still complain that the upfront investment required for buying a cylinder and accessories — including hose pipe, regulator, burner and grill — have remained expensive, implying that the reduction of tax is not enough.


Consumers in Rwanda pay on average Rwf125,000 — double the cost — for LPG and its accessories compared with Uganda, which locks out the average family from using the gas.

It is against this backdrop that many dealers and importers of LPG, with support from development agencies, suggest that the government should again step in with more incentives to stimulate the use of cooking gas as opposed to wood fuel and charcoal.

The intervention, some experts suggest, is for the government to come up with a fund, which should be channelled through microfinance institutions that will later make affordable micro-credit available to households to support purchase of required equipment.

The idea is premised on ground that not many Rwandans earn Rwf300,000 per month; therefore, the mass population required to consume gas and save the trees that are felled daily for fuel cannot afford paying the lumpsum Rwf125,000 upfront to invest in the LPG and accessories for use in cooking.

The much-cited example of a country that invested in switching to LPG and is now reaping the fruits is Indonesia, which switched from kerosene to LPG subsidies, leading to the government there saving $6.9 million per annum.

Another constraint cited by the industrial players is that the current storage facilities of gas and filling plants are not well distributed, leaving clients to travel long distances to refill their cylinders. This setback calls for setting up regional filling centres, a move that will reduce the cost for the mass market, especially in urban areas that are potential LPG consumers.

Most of these facilities are concentrated in Kigali. According to Rwanda Utilities Regulatory Authority (Rura), the regulators of the LPG gas in the country, Societe Petroliere (SP) has the largest storage capacity of 80 tonnes while Kobil Petroleum Rwanda, Sulfo Rwanda and Oxygen can only handle 42 tonnes each.

Perceived safety risk

With 210 tonnes, Abbarci Petroleum Marketing Company is to set up the largest storage facility while Merez imports and distributes filled cylinders, according to the regulator.

Another reason advanced by gas dealers is the perceived safety risk associated with some old steel cylinders, which are prone to bursting should there be a fire in case of leakages.

However, an investor has introduced a non-explosive, translucent, lightweight, non-corrosive cylinder with a casing to address the safety concerns.

“We have made a breakthrough in LPG cylinder design by using advanced technology to create a transparent composite cylinder, which controls gas outflow and does not explode in case of a fire accident,” said Liban Mugabo, chief executive of Safe Gas Rwanda.

Rwanda is the second market in the East African Community to have these cylinders.

“We started with 5,000 cylinders, added 10,000 and we are importing 20,000 more for next year as the market is slowly appreciating the safe gas cylinders,” said Mugabo.

The transparency feature of the cylinders enables users to monitor the level of the gas through the tank wall and ensure a timely refill.

Nonetheless, analysts maintain that, despite wood fuel remaining inefficient as there is a lot of heat loss, it offers much cheaper energy for households than modern options, especially in the absence of price interventions.