Govt mulls deregulating LPG prices

The Petroleum Division is looking to deregulate prices of liquefied petroleum gas (LPG) and has sought consent of the Council of Common Interests (CCI) to take provinces on board, a move that will give a free hand to LPG players in the market.

In the existing regime, the LPG prices are regulated and the Oil and Gas Regulatory Authority (Ogra) sets the prices every month.

The Petroleum Division is once again taking provinces on board in the upcoming CCI meeting to switch to deregulation of LPG prices. Following approval from the CCI, amendments to relevant provisions of the LPG (Production & Distribution) Policy 2016 would be required.

Previous governments had been dealing with the LPG sector in their own way as policies were changed at different times to ensure competition in the market.

However, volatility in LPG prices has been a major issue that leads to market manipulation and consumers have been left at the mercy of market players whereas government authorities are helpless.

The Petroleum Division says even after around two decades since its inception, it is difficult for the regulator to claim it has achieved the objectives stated in the ordinance to ensure competition for the benefit of market players and consumers in the LPG sector.

According to the Petroleum Division, a lack of adequate LPG storage facilities and stock, absence of LPG database, frequent demand-supply imbalances, resulting in shortage of supplies, particularly in far flung areas, and price distortions with a substantial room for manipulation by market players are a few examples of the inefficient regulatory role in the LPG sector.

Now, the Petroleum Division wants to deal with the LPG sector to ensure competition by promoting LPG imports.

According to the LPG marketers association, the government is going to discourage locally produced LPG whereas it is promoting LPG imports by placing more cuts on taxes and duties. It is of the view that it will create distortion in the market and will minimise competition.

Based on the deliberations held with the LPG stakeholders, the Petroleum Division says under the deregulation of LPG prices, it will be challenging to keep prices stable unless root causes of the issue prevailing in the market are addressed effectively.

Therefore, in order to achieve objectives of fair competition in the LPG supply chain under a deregulated pricing regime and for sustained LPG supplies at reasonable prices to consumers across the country, it is vital to remove the bottlenecks prevailing in the LPG market but it should not be limited to enhancing supplies through domestic LPG production and making imports competitive.

In addition to this, other objectives are enhancing the effective role of state-owned companies involved in LPG marketing, increasing storage capacity in the country and eliminating the exploitation power of market players under an enhanced and effective role to be played by Ogra under its ordinance and LPG rules.

The Petroleum Division is also in the process of devising a mechanism for making LPG imports feasible, enhancing effective role of state-owned companies and enhancing domestic LPG production for sustainable supplies under the deregulated regime for LPG prices.

Published in The Express Tribune, July 14^th, 2020.

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