ISLAMABAD: The representatives of the liquefied natural gas (LPG) stakeholders and the government failed to reach agreement on the product price for consumers as the private sector blamed the government side for not addressing the root causes of shortages and price hikes.

Informed sources said the government side led by Hassan Nasir Jami, additional secretary Petroleum Division of the Ministry of Energy proposed a formula under which it believed the LPG price should be set around Rs895 for 11kg domestic cylinders.

However, the LPG companies and distributors did not agree to the government’s proposed price for domestic consumers saying that it was not a reasonable price. LPG dealers association has said that the proposed price was not feasible for LPG imports and demanded to take weighted average of locally produced and imported gas to determine price.

Talking to Dawn a senior representative of LPG Distributors Association Ali Haider said the government was told that without doing away with signature bonus charged by the public sector companies and rationalising margins for marketing and distribution margins, the prices could not be made affordable.

He said the government companies were charging around Rs7,000 per tonne of signature bonus on domestic production.

He said the government side argued that signature bonus was charged to ensure transparent bidding of local production. The distributors, however, believed such a bidding encouraged monopolistic tendencies because the most powerful company would be able to take away the local supply and manipulate prices. They recommended that transparency could be ensured by allocating equal quota of 5-10 tonnes to smaller companies.

The distributors also demanded a quality check for imports and creation of a laboratory to ensure right price for the imported product. They also proposed that imports should also be done by public sector companies like OGDC, SSGCL, SNGPL and PPL etc who were also local producers on the basis of their local production and estimates for the shortage to be bridged through imports and setting of price on a combined value of imports and local production.

The government side agreed to consider these proposals as the stakeholders also proposed enabling policy for increased production at home for which substantial potential was available but was not being produced due to lack of incentives.

After the meeting, LPG Distribution Association Chairman Irfan Khokhar told the media persons that the proposed consumer price was unrealistic as current price of domestic cylinder was ranging from Rs1,200 to Rs1,400 depending on regions.

He said that LPG stakeholders suggested a formula in the meeting to calculate the actual LPG price for consumers. The price should be based on weighted average of locally produced LPG and its import price.

He further said that the government proposed a profit of Rs24,000 per tonne for LPG distribution and marketing companies. However, the LPG marketing companied have sought Rs29,000 per tonne, which included margins of distributors. However, Mr Khokhar suggested separate profit of dealers at 15 per cent on sale price of LPG.

He said that imports should be made feasible for smooth supply of LPG to avoid the demand supply issue.

“If imports are reduced, there would be demand supply issue in winter season causing shortage and black marketing of the fuel, he said, adding that there was 5.5 per cent advance tax on imports of LPG and demanded to impose 10 per cent petroleum levy on locally produced LPG to end disparity in prices of local and imported LPG. He said that share of imported LPG was 40 to 50 per cent at present that would rise in winter season. He said that import of LPG was contributing to meet local demand of consumers.

Published in Dawn, September 29th, 2017