ISLAMABAD: On the directives of the Lahore High Court, the Oil and Gas Regulatory Authority (Ogra) on Wednesday slashed the price of liquefied petroleum gas (LPG) by 30 per cent to Rs900 per cylinder with immediate effect.

In a notification, Ogra directed all the 119 LPG marketing companies to strictly comply with the price determined by the Ministry of Petroleum and Natural Resources on June 8, 2016 at Rs900 per domestic cylinder of 11.8 kg (Rs76,500 per tonne) including general sales tax.

The current retail prices of LPG ranges between Rs1,200 per cylinder in Lahore and up to Rs1,500 per cylinder in hilly areas like Azad Kashmir, Chitral and Gilgit-Baltistan.

Sources in the petroleum ministry and marketing companies claimed the regulator had made a mistake by providing limited information to the high court instead of explaining full ground realities. As a result, consumers are unlikely to benefit from the price cut at a time when the commodity costly and in higher demand due to winter.

Because of the higher import price, marketing companies would be reluctant to sell LPG to distributors at a loss and instead hoard and black-market, resulting in shortage.

The LPG pricing has been completely deregulated since Musharraf’s rule.

On petroleum ministry’s request, the Council of Common Interests (CCI) approved the LPG Production and Distribution Policy 2016 in April last year.

The policy required Ogra to regulate the LPG market and notify its prices.

To implement the CCI decision, Ogra was required to amend LPG rules to formally have powers for deregulation and notification of LPG prices. In the intervening period, Ogra was required to notify LPG price determined by the petroleum ministry on the basis of import contract price. These rules were required to be formally approved by the federal cabinet.

Ogra sources said the regulator forwarded revised LPG rules to the cabinet division (the administrative division of the regulator) which in the meantime was transferred to the petroleum ministry.

The summary for approval of LPG rules was rerouted recently through the petroleum ministry but this has not been taken up by the federal government.

In the middle of this institutional wrangling, the Lahore High Court was hearing a case of Gold Gas (an LPG company) and Pakistan Petroleum Limited (an exploration firm having substantial LPG production).

During the course of hearing, the High Court inquired about the LPG price from Ogra. Unprepared, Ogra reported that the prevailing LPG price was Rs76,500 per tonne or Rs900 per domestic cylinder of 11.8kg including GST. The court directed Ogra to file a written reply. To substantiate its half-prepared response, Ogra submitted the price determined by petroleum ministry in June 2016 instead of explaining the whole pending legal prices and that the June prices were of off-peak season and had changed with the advent of winter.

Based on Ogra’s submissions, the court ordered it to notify the price and ensure its implementation on Jan 27, 2017.

Ogra sources conceded the new price is not workable but the regulator was left with no option to issue a fresh order with price fixing at Rs900 per kg or Rs76,500 per tonne including GST.

The LPG marketing companies would be in contempt of court if they failed to violate the price fixed by the regulator but hastened to add it was not “a notification in true sense” because it was not backed by rules but a letter to all companies “informing them about the court orders”, the sources added.

Published in Dawn February 9th, 2017