CCI likely to approve plan of regulating LPG prices

Centre to seek consent of provinces for petroleum levy on LPG

ISLAMABAD: The Council of Common Interests (CCI) is likely to give its consent to regulating the liquefied petroleum gas (LPG) market in a bid to bring down prices of the commodity to make it more affordable, especially in winter.

The CCI will meet on February 29 where chief ministers of all provinces will be present.

The federal government will seek approval of the provinces for the new proposed LPG policy that calls for imposition of petroleum levy at Rs135 on every 11.8kg cylinder, officials say. This levy on locally produced LPG is equal to the freight margin and other costs incurred on LPG imports.

The reason behind the proposal is to provide an even-playing field for domestic producers and LPG importers and pave the way for an increase in gas supply through imports.

The Economic Coordination Committee (ECC) of the cabinet had reviewed the proposed LPG policy in its meeting on September 11, 2014 and instructed that it should be placed before the CCI - an inter-provincial body - for consideration.

Experts, however, suggest that instead of imposing the levy the government should offer subsidy and stop laying natural gas pipelines as part of schemes recommended by the parliamentarians to overcome the energy shortage.

In an effort to make political gains, the government is following a policy of extending the pipeline network of gas utilities to villages despite the fact that the country faces gas shortfall every year. Under the revised policy, the Ministry of Petroleum and Natural Resources wants the Oil and Gas Regulatory Authority (Ogra) to regulate and notify prices of locally produced LPG including the producer price, margins of marketing companies and the end-consumer price. Distributor margins will also be included in the margins of marketing companies.

The producer price has been estimated at Rs895 per cylinder compared to the current rate that ranges between Rs1,150 and Rs2,000. Marketing and distribution margins have been proposed at Rs283 per cylinder with general sales tax at Rs130.

Nepra’s annual report

The CCI will also review the annual report of the National Electric Power Regulatory Authority (Nepra) for 2013-14. In the report, the regulator said the power sector was marred by circular debt, an expensive energy mix, inefficient plants, high transmission and distribution losses and bad management.

It suggested that failure to provide adequate gas to power producers had resulted in a huge idle and unutilised gas-based capacity, which added to the cost of electricity.

The gas available to the power sector was not even being utilised in the most efficient manner. Apart from the expensive generation mix, another major reason behind the soaring electricity costs had been the excessive losses in the transmission and distribution system, the regulator noted.

Gas-producing areas

The CCI will discuss the scheme of supplying gas to villages located within 5km radius of the gas-producing fields.

Sui Northern Gas Pipelines is facing the problem of gas theft in the gas-producing areas. Local people also create problems for the exploration companies as they want gas connections. The scheme is expected to help remove the hurdles coming in the way of gas exploration activities.

Published in The Express Tribune, February 26^th, 2016.

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