Local industry criticises relief for LPG importers

The liquefied petroleum gas (LPG) marketers and distributors have hit back at the government for granting further cut in taxes to LPG importers fearing that it would lead to a monopoly of imported LPG over the locally produced product.

In this regard, the Petroleum Division had moved a summary to the Economic Coordination Committee (ECC) proposing several incentives for LPG importers at the cost of locally produced LPG.

In a statement on Saturday, the All Pakistan LPG Distributors Association and Pakistan LPG Marketers Association jointly said that the government’s decision would place a burden on foreign reserves at a time when the country is seeking rescheduling of loans due to virus-fuelled lockdown.

In its comments submitted to the Petroleum Division, LPG Marketers Association pointed out several discrepancies in taxation and duties on locally produced LPG and imported LPG.

Local LPG production is subject to 17% sales tax followed by an additional petroleum levy of Rs4,669 per ton whereas imported LPG enjoys a concession rate of 10% on sales tax coupled with complete exemption from regulatory duty. It expressed concern that the locally produced LPG is already at a price disadvantage compared to the imported product.

“It has now been brought to our attention that there is a proposal to further reduce the sales tax as well as the income tax on imports and eliminate tax on profit earned on imported LPG altogether,” the association said.

“These measures will further widen the price differential between imported and local LPG and cause a substantial revenue loss to the national exchequer.” He further said that such a move would dis-incentivise investment for establishment of LPG extraction facilities in the country. The discrepancy in taxation has also been highlighted by the Competition Commission of Pakistan in a report.

Petroleum Division spokesperson said the government has allowed local LPG producers to sell their LPG at international price, which is equal to Saudi Aramco CP. However, importer has to purchase LPG on the same price from international market, importer then brings this volume (which is 40% total supplies of the country) while incurring additional cost like; marine freight, port charges, incidental etc.

In September 2018, ECC reduced GST from 17% to 10% and waived off regulatory duty on LPG imports so that there could be a level playing field, he added.

He said that the government will try to take necessary measures for adequate supplies at reasonable prices and supplies in remote areas by making imports competitive with local one and enhancing local production.

Published in The Express Tribune, July 5^th, 2020.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.