LPG firms oppose tax proposal for locally produced fuel

Move to bring local fuel at par with price of imported LPG.

ISLAMABAD:

LPG marketing companies have opposed the idea of imposing a new tax Petroleum Levy (PL) on locally produced in LPG Policy 2012.

The petroleum levy has been designed to raise price of the local product at par with its imported product, said LPG Association of Pakistan Spokesperson Belal Jabbar.

“The levy will drive LPG price up to an unsustainable level where consumption by all sectors, particularly domestic will be adversely affected if implemented,” said Belal.

In a counter proposal LGP marketing companies have suggested the petroleum ministry to use income earned from Gas Cess, another imposed tax, to subsidise the cost of imports.

“The petroleum ministry has agreed to take this point under consideration,” he added.

Regarding deregulation of LPG Prices, the Petroleum Ministry agreed to cap LPG Producer Prices to a maximum of Saudi Aramco Contract Price and further agreed to include heads of expenses of LPG companies in determining reasonable price.

LPG industry stakeholders and regulator held a meeting on Monday to discuss Draft LPG Policy 2012.

Granting priority to public sector gas distribution companies over LPG produced by public sector exploration companies in new proposed LPG Policy 2012 was also discussed.

“Majority LPG companies have opposed the idea of granting priority to LPG produced by public sector producers to Sui companies and termed it anti-competitive,” said a senior official of the petroleum ministry.

LPG marketing companies said that public sector LPG producers were producing 60% of current production which already provides them a monopolistic status.

Public sector producers include Oil and Gas Development Company, Pak-Arab Refinery Company, Pakistan Petroleum Limited and Pakistan Refinery Limited while private producers including Jamshoro Joint Venture Limited, Attock Group and Byco.

“Additional projected local production will also accrue to public sector producers who now wish to supply this solely to Sui companies and this move will drive out the private sector companies altogether” said Jabbar.

The petroleum ministry also agreed to remove the clause requiring LPG companies to provide supply commitment of minimum 10 tons per day for three years as marketing companies feared that this clause would result in automatic cancellation of a large number of licences.

He said that the petroleum ministry also agreed to incorporate the suggestions of LPG companies in the Draft LPG Policy 2012.

“We are thankful to the Ministry for convening this meeting and providing the stakeholders with an opportunity to present their views” said Belal.

The meeting was chaired by Additional Secretary Petroleum, Naeem Malik who appreciated companies for their views and consented to reviewing the issues raised. A second meeting of companies may be called for finalising the draft.

Published in The Express Tribune, August 15^th, 2012.