Market reaction: Industry stakeholders kept out of the loop

Proposed petroleum levy to increase LPG price by 16%.

Express August 22, 2011

ISLAMABAD: Members of the liquefied petroleum gas (LPG) industry have said that the expected increase in the LPG price of Rs14 per kilogramme after the imposition of the petroleum development levy on locally produced LPG will hurt the domestic industry.

Sources told The Express Tribune on Monday that the Ministry of Petroleum and Natural Resources had moved a summary to the Economic Coordination Committee (ECC) for the formal approval of the new LPG policy without any input from the members of the local industry.

“The imposition of the levy and 20 per cent import condition will hurt the local industry,” an official said.

The official further said that the proposed LPG policy was drafted without the involvement of industry stakeholders. “It was a bad attempt to create a public-sector monopoly,” official added.

Market officials are of the view that the proposed LPG policy would cause a hike in the price of the locally produced LPG by 16.6 per cent, rendering it more expensive than the imported LPG.

According to the proposed policy, the price of the locally produced LPG will be at par with landed cost of imported LPG. This is being done, according to the ministry sources, to bar local producers from selling LPG at higher prices.

The new LPG policy will require all LPG marketing companies to import 20 per cent of their total LPG supplies or risk the cancellation of their licence if they do not do so for over three months.

Last year, private-sector companies imported almost 80,000 tons of LPG. Pakistan’s local LPG production stands at 1,200 tons per day. The proposed policy envisions the mandatory import of 9,000 tons per month, or 108,000 tons per year.

Since 2000 when the LPG sector was deregulated, it has attracted about $300 million in investment.

Published in The Express Tribune, August 23rd,  2011.


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