ISLAMABAD, Jan 4: The average price of an 11.8kg cylinder of liquefied petroleum gas (LPG) will surge by more than Rs90, affecting several million people who use it as an alternative fuel for cooking and heating, especially in rural areas.

The price hikes comes in the wake of the government’s move to link the base price of local stock with international market.

Consumers would now pay Rs7.62 per kilogramme more on LPG after the average price of 11.8kg cylinders was increased to Rs600 against Rs510 per cylinder, the consumer price prevailing in December 2006.

LPG marketing companies would now supply 11.8kg cylinders at Rs550 to distributors. When additional charges of distributors are added, the consumers would have to buy LPG at around Rs600. The average price of an 11.8kg LPG cylinder was Rs494 in December 2005 against Rss510 in December 2006, an increase of little more than 3 per cent.

Official statistics indicated that marketing companies would now be getting LPG at a production price of Rs34,349 per ton (inclusive of GST and excise duty) against the previous rate of Rs28,848 per ton, a difference of more than Rs5,501 per ton.

The marketing companies’ profit will increase by more than Rs10,000 to Rs46,750 per against Rs36,125 per ton.

Chairman off the LPG Distributors Association Hadi Khan told Dawn from Karachi that the ECC’s decision to link local LPG prices with the international market would further increase the LPG rate, ultimately affecting poor consumers.

He questioned the logic of government interference in LPG market following its deregulation in 2000. He said that the government’s decision would only benefit a few local producers and investors while hurting the consumers’ interests.

The current landed cost of imported LPG comes to Rs48,000 per ton. Only 4,000 to 5,000 tons of LPG was being imported annually to meet the local demand. The local production was around 48,000 tons per month.

Mr Khan said there was no need to link the domestic price of LP with the international market, adding that it would affect a large number of low-income people.

Mr Hadi suggested that the government should waive 15 per cent general sales tax and six per cent withholding tax on imported LPG to lower its price making it more compatible with domestically-produced gas.

The gas marketing companies in Lahore have already suspended the supply resulting in a hike of more than Rs7 per kilogramme during the past week. It indicated that the marketing companies were multiplying their profits without any signs of shortage in the local market.

An official in the finance ministry said: “The low local price was one of the reasons hindering foreign entrepreneurs investing in the LPG sector. The raise in LPG’s local price will enable the government to attract foreign direct investment.” He said that most of the marketing companies were operating on a profit margin of 100 per cent or more.