May 12, 2006	Friday	Rabi-us-Sani 13, 1427

KARACHI, May 11: There is no sign of a let-up in prices of liquefied petroleum gas (LPG) as many dealers are now charging Rs65-70 as compared to Rs55-60 per kg last week.

In the absence of any check from the government, consumers are at the mercy of retailers who demand price on their own. Last month, the gas was available at Rs25-30 per kg.

On the other hand, LPG distributors and marketing companies blame each other for price hike. The distributors attributed the hike to an increase in cylinder price by the marketing companies. At present an 11.8-kg LPG cylinder is being sold for Rs550-570 as compared to Rs520 three days back. It was Rs420 last week.

LPG Distributors and Welfare Association Chairman Hadi Khan held the marketing companies responsible for further raising prices. He said many LPG dealers were now bringing gas from Punjab and were charging exorbitant prices from consumers, adding that the distributors would be forced to suspend their business activities if the marketing companies did not reverse the price.

LPG producers last month increased the price to Rs20,214 from Rs17,000 per ton. Besides, there has been a suspension in gas supplies from two producers by over 100 tons a day.

“The gas should not sell above Rs50-52 per kg at the retail level, but dealers seem bent on cashing the situation,” Mr Hadi said.

A retailer said the distributors resorted to strange tactics by spreading rumours in the market that LPG was short. They also keep supplies at their hand so that they could cash the situation in view of rising demand for the gas. “We are getting LPG at higher rates from the distributors,” he added.

On the contrary, the LPG Association of Pakistan (LPGAP), a grouping of 34 licensed LPG marketing companies, said that the increase in producer prices recently, lower than expected production, and rising petrol and diesel prices were contributing to the upward trend in retail prices of LPG.

A spokesman for the association, who asked not to be named, said some LPG marketing companies had increased the price of 11.8-kg cylinder to Rs575-600 from Rs525 four days back in Karachi. Even in Lahore, some marketing companies have raised the rate of cylinder to Rs475 from Rs445.

“We cannot dictate our members on the price fluctuation issue as they have their own companies’ policy to follow,” he said, adding that the price hike at the retail level is surprising as demand usually remains slow in summer and prices recede.

The association smells a further price increase from the producers in the LPG Producers Advisory Committee meeting on May 12. Producer price increases are commensurate with the government’s guideline to gradually bring LPG prices to the international market level,” said the spokesman.

He says consumers expect petrol and diesel prices to rise further. This has prompted additional conversions of rickshaws, motorcycles and taxis to LPG, which remains more feasible than petrol or diesel.

This additional demand coupled with lower than expected production due to shutdown or poor performance of local production sources had pushed LPG retail prices to historic highs, he said.

The LPGAP is proposing a three-step strategy for easing prices. Despite a Cabinet decision last September legalising the use of LPG in automobiles, a regulatory framework is not yet in place. The non-existence of regulated LPG auto gas stations provides an opportunity to middlemen to increase retail prices to the substantial detriment of the consumers.

Secondly, the association believes that LPG is an essential item and its import should be free of all taxes. The government has recently allowed the import of duty-free cement and also subsidised its freight cost.

Additionally, Pakistan has the potential to raise local production, currently about 1,600 tons per day, in a short period of time.

Sui Southern Gas Company Limited and Sui Northern Gas Pipelines Limited have invited expressions of interest from the private sector to install LPG production plants throughout the country.

Encouraging public-private partnerships in the energy sector will enable Pakistan to increase LPG production by another 500-800 tons,” the spokesman added.