Local LPG producers seek level playing field

Urge government to remove disparity in taxes

Our Correspondent June 13, 2021
Due to disparity, entities suffer an average loss of Rs20,800/MT when constrained to sell below OGRA’s notified prices to compete with subsidised importers. PHOTO: FILE


Pakistan Petroleum Exploration and Production Companies Association (PPEPCA), a body of local LPG producers, has urged the government to provide level playing field.

It has expressed concerns that so far necessary action to alleviate existing disparity of taxation between local and imported LPG has not been initiated either by the Ministry of Finance or the Federal Board of Revenue (FBR).

The local LPG producers are paying petroleum levy on indigenous gas. The government has increased the target of Petroleum Levy from Rs5.5 billion to Rs7.6 billion in the budget for the next financial year. This means that local LPG producers would pay more on account of petroleum levy on locally produced LPG - a move that has also upset local producers.

Read: OGDCL not consulted in new LPG policy

A letter sent to Director General Petroleum Concession (DGPC) has again emphasised that to the disadvantage of local producers, General Sales Tax (GST) of 17% is being charged on domestically produced LPG, compared to 10% on imported LPG. Likewise regulatory duty at Rs4,669/MT on imported LPG has been withdrawn, whereas, Petroleum Development Levy of the same amount continues to be charged on local production of LPG.

When the consumer price is same in the open market, for both local and imported LPG, this skewed taxation structure is favouring importers and badly damaging the local producers, LPG body said. Besides, this undue benefit to importers in a non-transparent way entails malpractices and causes loss to the national exchequer. More concerning is the lack of action and continuous delay in bridging this gap to rationalise the structure extending a level playing field both to importers and local producers.

Read more: Petroleum Division amends LPG policy draft

Out of total monthly LPG production of around 65,000/MT in the country, almost 90% pertains to Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL) and Pak Arab Refinery Limited (Parco), Government Holdings (Private) Limited (GHPL), Pakistan Refinery Limited (PRL) etc. Due to the aforesaid disparity, these mainly government-owned entities suffer an average loss of Rs20,800/MT when constrained to sell below the Oil and Gas Regulatory Authority’s (Ogra) notified prices in order to compete with subsidised importers.

This translates to an indirect annual loss of billions of rupees to government, in addition to direct loss to exchequer on account of low sales tax and nil regulatory duty. “In view of above, we request your immediate intervention in the matter to address this anomaly existing between two different taxation regimes applicable to local vs imported LPG,” PPEPCA added in the letter.

Published in The Express Tribune, June 13h, 2021.

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