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LPG imports choke as prices soar

Updated November 15, 2017
Consumers line up to buy LPG cylinders in this file photo. The demand for the fuel rises sharply in winter.
Consumers line up to buy LPG cylinders in this file photo. The demand for the fuel rises sharply in winter.

ISLAMABAD: The consumer prices of Liquefied Petroleum Gas (LPG), officially described as poor man’s fuel, kept on increasing for the second week running amid rising winter demand as the government sits on a cabinet decision to notify its prices and end its deregulation.

Informed sources said the price increase was triggered by three major factors – the government’s inability to notify LPG price despite a cabinet decision of early last month, imposition of petroleum levy on local product early this month and a summary seeking imposition of regulatory duty on imported product.

On top of this, the market players started taking advantage of the uncertain situation coupled with reluctance by traders to import more product while waiting for clarity. As if that was not enough, the regulator – Oil & Gas Regulatory Authority – played the role of a silent spectator instead of activating its monitoring and enforcement machinery.

As a consequence, chairman of LPG Distributors Association Irfan Khokhar announced a Rs5 per kilogram increase in LPG price – putting the price of 11.8kg domestic cylinder between Rs1390 to Rs1570 for various parts of the country against a previous rate of around Rs900 per cylinder announced by the regulator a couple of months ago.

‘Poor man’s fuel’ pushed up by govt revenue needs and failure to notify consumer price

This followed a Rs8 per kg increase in LPG price almost a week ago after the government imposed a petroleum levy on locally produced product at the rate of Rs4,669 per tonne.

As if that was not enough, acting secretary petroleum Sikandar Sultan Raja moved another summary seeking imposition of Rs4,669 per tonne regulatory duty on imported LPG to “provide a level playing field to both producers and importers effective Nov 1. Under the law PDL cannot be imposed on imported product, hence the regulatory duty.

The ECC or any other decision making forum has not yet approved imposition of regulatory duty but it has already led importers to halt the placement of further orders, according to market players who jacked up the price taking advantage of the demand-supply gap.

Interestingly, a local LPG company had sought Mr Raja’s intervention claiming the local companies were incurring a net loss of about Rs131 per 11.8 kg cylinder at an ex-plant approved cost of Rs863 when compared to importers’ Rs43 per cylinder profit. The ex-plant actual cost of 11.8kg cylinder, the company claimed, worked out at Rs994 compared to Rs821 per cylinder of imported cost.

On the other hand, the federal cabinet had decided on October 10 that a committee led by a senior officer of petroleum division and comprising heads of five public sector companies would determine the LPG consumer price and direct Ogra to notify it and ensure compliance. The decision has not been implemented so far, leaving the prices to market players.

Mr Khokhar alleged that a public sector company and the LPG mafia were active to thwart the government decision to control LPG prices and criticized the government for levying tax on imported product.

The representatives of the distributors and marketing companies have been demanding that they should also be made part of the LPG price committee to avoid manipulative position of the public sector companies who were already charging high prices on locally produced product through signature bonuses.

Published in Dawn, November 15th, 2017