The government is planning to withdraw all duties and taxes on import of liquefied petroleum gas (LPG) cylinders, kits and related equipment to encourage the setting up of LPG stations in the country and discourage demand for compressed natural gas (CNG) in the face of natural gas shortage.
“The LPG industry is being opened for investors by giving incentives on import of gas cylinders and kits,” a senior official of the Ministry of Petroleum and Natural Resources told The Express Tribune.
According to sources, the commerce ministry has submitted a summary proposing withdrawal of all taxes on import of LPG cylinders and kits to the Economic Coordination Committee (ECC) of the cabinet for its consideration. The Federal Board of Revenue (FBR) and the petroleum ministry have backed this proposal, which will encourage consumption of LPG in automobiles.
The taxes on import of LPG cylinders and kits include general sales tax, withholding tax and federal excise duty.
In the summary, the commerce ministry recalled that the government has already imposed a ban on import of CNG cylinders and kits due to the energy crisis, but this has upset foreign investors.
Foreign firms dealing in CNG cylinders and kits and car manufacturers are still asking the government to lift the ban on import of cylinders and kits, but the government has turned down their request.
“The Ministry of Petroleum wants to encourage import of LPG that currently stands at 10% of total LPG consumption in Pakistan,” the commerce ministry said.
The government intends to phase out CNG stations by placing restrictions. At present, a proposal is under study to close 15-year-old filling stations and not grant extension for five more years. Other proposal being considered is that CNG outlets operating in residential areas should also be shut down.
In order to curb demand, the government has made a massive hike in CNG prices over the last few months and imposed gas infrastructure development cess.
There are also plans to convert CNG stations into LPG outlets to ease pressure on gas supply and divert the gas allocated to CNG stations to the industry and power companies.
However, officials of the Oil and Gas Regulatory Authority (Ogra) cautioned that the country had not secured LPG supplies and, therefore, its prices were not stable in the domestic market.
“The use of LPG in the auto sector can be possible only if the country has long-term supply contracts with different countries,” the petroleum ministry official said, adding if there were no supply contracts, the domestic market would face LPG shortage following its consumption in automobiles.
Published in The Express Tribune, August 15th, 2012.