ISLAMABAD: Expressing its inability to control the prices of Liquefied Petroleum Gas (LPG) because of vague laws and its deregulated market, the Oil and Gas Regulatory Authority (Ogra) on Friday asked the government to completely deregulate or legally empower it to regulate the sector.

Speaking at a rare news conference, Ogra Chairman Saeed Ahmed Khan said the current legal position regarding the LPG business is confusing. “The present status is neither here nor there”, he said, adding the market players were using legal weaknesses to manipulate the prices.

Without naming Petroleum Minister Shahid Khaqan Abbasi, the Ogra chief said he would not like to comment on the statement of senior government functionary that the regulator had failed to control LPG prices but dismissed the accusation.

He said Ogra was dealing with the LPG sector under LPG (Production and Distribution) Rules 2001 and the prevailing policy of the government under which the prices and allocation of LPG are deregulated.

He said LPG producers were free to allocate LPG to any company having operational licence from Ogra. The LPG prices both at producer and consumer levels were not fixed or notified by Ogra but by the market forces.

Under Rule 18 of LPG rules, producers and marketing companies are required to notify prices of their LPG on monthly basis and inform the regulator. The licensees were also required to publish their prices in the press.

If the prices so notified by the licencees were considered unreasonable or in the event of any cartel formation, the Ogra may determine a reasonable price in accordance with the prevailing policy of the Federal Government but without any pricing formula unlike natural gas or oil products.

LPG policy Guidelines 2013 provides the framework for LPG pricing at producer and consumer levels and role of Ogra therein.

As per policy LPG producers can charge any price from marketing companies without any benchmark or legal provision for interference of Ogra in so far producer prices were concerned.

Regarding consumer prices, Ogra had to oversee and monitor that they remain within a reasonable margin after accounting for primary transportation, all operating and administrative costs and taxes for LPG marketing companies and distributors.

Ogra was authorised under the policy to intervene in case of deviation form the above basis and would also involve the local administration to ensure punitive action against the defaulting companies and distributors.

However, Ogra had been barred by the Lahore High Court form determination and fixing of reasonable consumer price of LPG and taking any punitive or coercive action against LPG marketing companies on the grounds of reasonability.

Nevertheless, Ogra was monitoring the prices of LPG producers and consumers through daily consumer price data from major LPG marketing companies. The prices notified by LPG marketing companies are published in the newspapers and also placed at Ogra website.

If any distributor is found charging price higher than notified by respective marketing company, the company was held responsible under the rules and terms and conditions of the licence and was penalised.

He said Ogra had imposed Rs4.2 million fine on LPG companies under licensing rules. The Ogra has also informed the provincial governments about the prevailing prices of LPG consumers and requested them to take action against the distributors and companies charging over and above those notified prices.

He said Ogra had taken serious notice of the LPG price hike and immediately dispatched inspection teams in the cities where LPG prices were reported high, including LPG storages and filling plants in all provinces

He said all the chief secretaries and district coordination officers had also been requested to ensure that the LPG distributors sell LPG cylinders of LPG marketing companies only and to take strict action against illegal distributors and decanters operating in their respective areas.

Published in Dawn, January 17th, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play