KARACHI, Sept 28: Producers of liquefied petroleum gas (LPG) have increased the price of LPG by 62 per cent in nine months from January to September 2004 in contrast to meagre increase in prices of petroleum products.

During this period, petrol price was increased by 8.5 per cent, diesel by 6.52 per cent, HOBC by 7.83 per cent and kerosene by 6.75 per cent, although crude oil prices touched new heights in international markets.

LPG producers have changed the price eight times since January 2004 on the ground of fluctuations in world crude oil prices structure. Pak Arab Refinery Limited (PARCO), the main producer of LPG with 450 tons a day, has escalated the LPG price to Rs22,500 on September 15 from Rs13,710 per ton, up by 63.72 per cent.

Another leading producer, Oil and Gas Development Corporation (OGDC), with a production of 200 tons a day, has jacked up price by 58 per cent to Rs22,500 from Rs14,211 per ton in January.

Applying the same logic, the price of POL products should have changed accordingly but in January-September 2004, the increase ranged between 8-11 per cent. The increase in LPG prices had been increased arbitrarily and have resulted in windfall profits to the producers, market sources said.

The government has taken a rather late decision to cut the price of LPG cylinder (11.8 kg) by Rs95 in order to prevent customers from paying undue prices, they maintained. The chairman, LPG Association of Pakistan (a body of marketing companies), Iqbal Z. Ahmed thinks there is a need to find a long term solution to this problem.

"Not a single meeting has been held between producers and marketing companies so far to discuss the issue at length," he said adding that he had been requesting the OGRA and the petroleum ministry to hold meetings but no response had come. Meeting with producers could help analyze the situation and chalk out future strategy to combat inflationary trend in prices, he added.

To a query as what kept the government from taking an early decision, he said that the product had been deregulated in September 2000, which meant that the government had agreed to abstain from interfering in the pricing mechanism unless it becomes absolutely necessary.

However, there is an understanding in the government quarters that whenever LPG cylinder price goes beyond Rs400 level, the government interferes for the sake of end-users. Cylinder price had surged up to Rs500 recently.

Perhaps another reason of taking late notice was that there was no pressure as such from the end-users as majority is in rural areas where natural gas is not available.

The case of POL products is different as it is mostly consumed in urban areas like in transportation of goods. Any increase in POL price quickly makes newspaper headlines besides fuelling inflation in commodity prices due to high transportation cost.

He did not agree that rickshaw and taxis are the major users. Around 80 per cent of LPG demand comes from domestic side, while auto sector shares only 20 per cent. There is a ban on using LPG in vehicles, but nothing has been done so far. There is a need to regulate LPG prices and lay down safety standards by the government on the pattern of CNG.

Iqbal said that LPG production is likely to gain momentum in coming months as 500 tons a day production will get underway from the Jamshoro project by December 2004, followed by 120 tons from Bobi (ODGC field) by October, 60 tons from Chanda by November, 50 tons by Bosicor and 60 tons by OPI field.

The arrival of gas from these new destinations will definitely bridge the gap between demand and supply and hopefully in winter season, when demand peaks up in Northern areas, price at retail level is likely to range between Rs34-35 per kg.

On the contrary, the government's decision of cutting the LPG cylinder (11.8 kg) price by Rs95 on Saturday has yet to bring any relief to the consumers who are still paying Rs42 per kg till Tuesday night at the retail outlets. "I think the LPG price will come down to Rs34 per kg in a day or two," he added.