28 September 2004	Tuesday	12 Shaban 1425

KARACHI, Sept 27: Instead of paying Rs37-38 per kg, as per government's decision of cutting price of liquefied petroleum gas (LPG) on Saturday, consumers on Monday continued to pay Rs42-43 per kg.

Gas dealers maintained the high price level till Monday, saying that the marketing companies had not yet reduced prices. Association (LPGDWA) said that till evening only one mega producer of gas had reduced the rate while others may follow suit. They said that prices in local markets had not come down on Monday.

It may be noted here that market forces have been quick enough to increase the rates but when it comes to the decline, they adopt dilly-dallying tactics in implementing the government's decision.

Only Parco, which produces 450 tons per day out of 1,000 tons, has reduced the rate to Rs17,000 (excluding general sales tax) from Rs22,000 per ton, the association office bearers said.

However, other refineries and producers had not slashed the rates with almost same quantum. Market sources said that if Parco the main producer has slashed the rate then others will have to follow the suit in order to avoid distortion in the rates.

Market sources said the government's decision could not be implemented on Monday due to many reasons. Distributors have got the old stocks purchased on higher rates.

They will lift the quantity from the marketing companies and then the product will find the way in the supply chain mechanism, resulting in price decline. It may take some time when ever distributors will lift the quantity from the marketing companies at reduced rates.

The chairman and senior vice-chairman of LPGDWA, Hadi Khan and Mohammad Ali Haider said that the retail price is likely to decline to Rs38 from Rs43 per kg from Tuesday. A domestic cylinder (11.8 kg) price will dip to Rs395 from Rs460. The rate of commercial cylinder will plunge by over Rs300 to Rs1,410 from Rs1,770.

They said that some marketing companies had informed the association on Monday evening that they had reduced the prices and new reduced prices would become effective from Tuesday.

The rising crude oil prices in world markets had forced the refinery operators to jack up prices. LPG producers were enhancing the gas prices to bring in line with monthly Saudi Aramco contract price.

It is unclear how LPG importing companies will pass on the benefit to the consumers in shape of price fall as they have brought LPG at very higher rates. Due to government's decision, they will be bound to cut the rates otherwise consumers will not lift their product.

Market analysts say that they fail to understand as to which base or product price has been kept in mind by the government planners in slashing the rate. In petrol and diesel - it was the petroleum development levy (PDL) that had been brought to zero to offset the negative impact on rising crude oil prices. It was unclear that what was the basis to bring down the LPG cylinder (11.8 kg) by Rs95.

Use of LPG as a domestic fuel is being encouraged to stop deforestation in areas where the supply of natural gas is technically or operationally not feasible. Presently about 1,000 tons per day of LPG is being produced locally.

LPG rates had been under pressure for the last few months owing to rising trend of oil prices in world markets. Earlier in July, it was selling at Rs29-30 per kg. In first week of August, it peaked to Rs38 per kg.