Petroleum levy to push LPG price up by 16%

Draft policy proposes identical local and imported gas prices.

Express July 29, 2011


A new liquefied petroleum gas (LPG) policy being formulated by the Ministry of Petroleum and Natural Resources is expected to cause an increase of 16 per cent in prices of locally produced LPG due to imposition of petroleum levy.

Industry sources were of the view that the new LPG policy, without the input of industry stakeholders, was an attempt to create a public sector monopoly.

“The policy will cause a 16.6 per cent increase in prices of locally produced LPG, making it more expensive than imported gas,” an industry source said, adding the industry feared that business of the country’s 80 LPG marketing companies would go into the hands of Progas Pakistan Limited, which was recently purchased by Sui Southern Gas Company (SSGC).

According to the draft policy, the price of locally produced LPG will be equal to the landed cost of imported LPG in order to bar domestic producers from selling gas at higher prices. “The proposed petroleum development levy will increase the cost of LPG for end consumers by Rs14 per kg based on current prices,” the source said.

The new policy will require all LPG marketing companies to import 25 per cent of their supplies or risk cancellation of licence if they do not comply for more than three months. “Such a provision is highly questionable,” said the industry source.

Last year, private sector companies imported around 80,000 tons of LPG. Domestic production is 1,200 tons per day and the draft policy envisions mandatory import of 9,000 tons per month or 108,000 tons per year.

Industry sources said LPG marketing companies were complying with Oil and Gas Regulatory Authority’s (Ogra) directive and were getting a net margin of Rs3 per kg, but alleged that LPG distributors were reaping a margin of Rs18 per kg.

In the last 11 years, since the LPG sector was deregulated, investments worth about $300 million have been made.

Published in The Express Tribune, July 30th, 2011.


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