ISLAMABAD, Nov 30: The caretaker government on Friday reversed a decision of former Prime Minister Shaukat Aziz and completely de-regulated the pricing mechanism of Liquefied Petroleum Gas (LPG).

The decision was taken at a meeting presided over by caretaker prime minister Mohammadmian Soomro who directed the Oil and Gas Regulatory Authority (Ogra) to de-link the price of LPG from the Saudi Aramco control price.

Practically, now LPG producers would be free to fix wholesale prices, and subsequent supply chain, including distributors and dealers, would set their prices for retail sales.

The government had deregulated the LPG industry in 2000, under which LPG producers had formed a cartel-like situation to fix production prices.

As a result, they used to increase prices at their own will, primarily ahead of winters when domestic onsumption increased.

The LPG market at the time was restricted to domestic consumption and its use in vehicles was banned and the administration used to take criminal action on violation.

In December last year, the then prime minister Shaukat Aziz linked its prices with international prices –calculated on the basis of Saudi Aramco contract prices – on the demand of a couple of private sector investors, led by Iqbal Z. Ahmed, although more than 95 per cent production of LPG comes from the domestic sector.

Subsequently, on the demand of same private sector investors, the previous government also allowed use of LPG in auto-sector.

Since then, the LPG market has heavily tilted towards automobiles with about 60 per cent market share.

As a result, the domestic consumption now stands at about 40 per cent of the entire market, although it remains a fuel of compulsion mostly in rural areas because of it being environmental-friendly and lack of other fuel sources.

However, prices which were about Rs17,000 per ton in April 2006 increased to Rs25,000 per ton in December last year, but surged to more than Rs45,000 per ton at present, showing an increase of almost 300 per cent in matter of 18 months.

The use of LPG in auto sector, however, created a new dimension in the market.

Despite over 300 per cent increase in prices, LPG still remains almost at 60 per cent of petrol which is the competitive fuel. This, however, is almost forcing out the domestic consumers.

An official statement quoted the caretaker prime minister as saying that the interest of the consumer has to be given foremost priority, and, therefore, it would be better if the price of such a commodity of daily use is driven by market forces of demand and supply rather than notification by the government.

He, however, directed the Ogra to keep a close watch on supply and prices of LPG to ensure un-interrupted supply of LPG in far- flung areas at reasonable prices.

The Secretary of Petroleum and Natural Resources told the meeting that the LPG share in the country’s energy consumption has increased from 0.4 per cent last year to 0.5 per cent this year. He said 92pc of LPG consumed in the country is domestically produced.

He also said 1.5 million households are using LPG fuel for cooking and heating purposes, while the main user of this type of fuel is the automobile sector.