ISLAMABAD: The local LPG industry has expressed concern over tax and duty concessions given on imported product under the supplementary finance bill 2018 cleared by the National Assembly, saying this would benefit only importers instead of 8-9 million consumers.

The Statutory Regulatory Order (SRO) issued by the Federal Board of Revenue (FBR) on October 3 allowed a waiver of regulatory duty on imported liquefied petroleum gas (LPG) amounting to Rs4,669 per tonne whereas local LPG would remain subject to Rs4,669 per tonne Petroleum Development Levy (PDL).

“The effect on the pricing of imported LPG suggests that local LPG is now expensive than the import product which is going to hit the domestic LPG industry hard,” said Mohammad Ali Haider, senior vice chairman of a standing committee of the Federal of Pakistan Chambers of Commerce and Industry (FPCCI).

In a communiqué to the Ministry of Energy, Mr Haider pointed out that imported product was cheaper than domestic LPG by Rs6,000 per tonne if routed through sea and Rs13,000 per tonne by land route.

He explained that Pakistan’s total LPG requirement currently stood at around 1.2m tonnes out of which the local production was 0.8m tonnes, leaving a shortfall of around 0.4m tonne met through imports from Gulf countries.

Exporters of Gulf countries normally fix their export prices in line with Pakistan’s local market and offer discounts on Saudi Aramco Contract Price (CP) to compete with local producer prices, the FPCCI communiqué read.

Normally the freight on board (FOB) prices ranged between $80 to 100 discount to Saudi Aramco CP. Sea Freight is around $50 per tonne, making the CIF (cost, insurance and freight) price $20-40 lower than Saudi Aramco CP on which the Pakistani product is priced.

Mr Haider said the government’s move to reduce taxes and levies on imported LPG will result in price hike by the exporters and the end consumer will not get any relief.

Secondly, if the imported LPG is made cheaper as compared to locally produced LPG, this will also hurt the profitability of local marketing companies who have invested in LPG filling plants, storage, transportation fleet, manpower development and marketing teams spread nationwide.

Also, local companies have invested significantly in Signature Bonus being paid to producers at the rate of about 77,000 per tonne to secure allocation of LPG quota.

The FPCCI standing committee has asked the government to make pricing policy in a manner that offered at least 20pc cost benefit to the locally produced LPG. A Petroleum Division official said the Economic Coordination Committee decision offering tax and duty concessions on import was meant to facilitate imports in view of demand supply imbalance in the country that was encouraging profiteering and black marketing.

He said the government would have to ultimately work out a weighted average price of imported and domestic product and channel supplies through public sector companies to the marketing companies and retailers under the monitoring mechanism of the Oil and Gas Regulatory Authority (Ogra) and the provincial governments.

Published in Dawn, October 6th, 2018