Relief in sight as LHC suspends petroleum levy

The levy had taken LPG prices to record highs.

ISLAMABAD: The Lahore High Court on Monday suspended the petroleum development levy (PDL) imposed recently on domestic production of liquefied petroleum gas (LPG).

Hearing identical petitions on the matter, the court suspended a notification issued by the Ministry of Petroleum and Natural Resources on January 16 that imposed PDL of Rs11,486 per ton on all LPG produced in the country.

The imposition of PDL had made the fuel the most expensive in the country, sparking protests from the LPG industry and consumers. However, the court’s suspension is expected to rationalise prices.

“We are grateful to the court, this is the second time that the court has intervened on behalf of LPG consumers,” said Belal Jabbar, spokesman for the LPG Association of Pakistan, a body of marketing companies.

Since the imposition of the levy last month, the LPG demand had dropped around 30 per cent, he said, adding the court’s suspension would improve access to the product and stabilise the market.

LPG distributors also welcomed the court’s order. “The petroleum development levy had forced LPG consumers to switch to cheaper alternatives and had put tens of thousands of jobs in the LPG sector at stake. The court’s decision will provide relief to LPG consumers across the country,” said Ali Haider of the All Pakistan LPG Distributors Association.

The government imposed the levy in order to bring prices of domestically produced LPG on a par with imports. Some 95 per cent of LPG needs of the country is met through domestic production.

Prices of Saudi Aramco contract price, with which the local market is linked, hit a record high at $1,028 per ton last month and this coupled with the Rs11,486 per ton levy rendered LPG uncompetitive compared with other fuels. As a result, no imports were made during February and inventories of LPG marketing companies and producers rose.

Last year, the Lahore High Court also suspended the PDL as well as LPG Policy 2011. However, the government restored the levy in January after amending rules governing the LPG sector.

The government is the largest producer of LPG in the country by virtue of its shareholdings in companies including Oil and Gas Development Company (OGDC) and Pak Arab Refinery Company (Parco). Its market share in LPG production is over 60 per cent.

Published in The Express Tribune, February 28^th, 2012.