Govt stops OGRA from setting LPG prices

Forms committee of state-run LPG producers to determine fuel prices

ISLAMABAD: The government has clipped the wings of the Oil and Gas Regulatory Authority (Ogra) and has constituted a committee comprising state-run liquefied petroleum gas (LPG) producers and federal government representatives to determine LPG prices, which may lead to state monopoly over the market.

“No representative of Ogra has been nominated for the LPG pricing committee where representatives of Pakistan Petroleum Limited, Oil and Gas Development Company, Pakistan State Oil, Sui Southern Gas Company, Pak-Arab Refinery and Petroleum Division will sit,” said a senior government official.

Secretary or the additional secretary of the Ministry of Energy (Petroleum Division) will head the committee.



The official revealed that the cabinet, in a meeting, had decided that a committee would determine LPG prices and the Petroleum Division would intimate Ogra, which would, in turn, notify the new rates.

Under the deregulated market mechanism, Ogra was authorised to intervene and set a reasonable price in case of higher LPG prices. However, during that time, Ogra and the federal government were locked in a tug of war as the regulator expressed its inability to notify the price proposed by the Petroleum Division.

The official clarified that the pricing committee had been formed to implement the LPG policy approved by the Council of Common Interests (CCI) in a bid to regulate the market. Based on recommendations of the committee, the Ministry of Energy (Petroleum Division) will revise LPG prices from time to time.

The cabinet had been informed that under the deregulated mechanism, the domestic LPG market faced scores of challenges including demand-supply gap, cartel formation, litigation in courts and price distortion.

LPG was considered a poor man’s fuel but it was priced more than 20 times higher than the price of natural gas for domestic consumers, the cabinet was told.

Realising the importance of the issue, the Petroleum Division arrived at the conclusion that the deregulation policy had failed to achieve intended objectives including fuel availability at affordable prices.

The situation warranted immediate intervention and the Petroleum Division considered it expedient to put in place a framework to regulate LPG prices both at producer and consumer levels.



In March 2002, the government had promulgated Ogra Ordinance 2002 for setting up an independent regulator. A year after that, all regulatory functions, along with powers under LPG (Production and Distribution) Rules 2001, were transferred to Ogra and role of the Ministry of Petroleum was confined to just policy formulation.

In the new mechanism approved by the federal cabinet, the Petroleum Division and the LPG pricing committee have got all the powers whereas Ogra will only notify the prices.

Experts were of the view that now state-run LPG producers would create a monopoly over LPG prices, bypassing the regulator which had the mandate to determine prices to safeguard the interest of consumers and investors.

Published in The Express Tribune, October 19^th, 2017.

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