ISLAMABAD: The government has allowed the private sector to set up LPG Air-Mix Plants (AMPs) and empowered the Oil & Gas Regulatory Authority (Ogra) to oversee (instead of regulating) the new business through licensing, monitoring and enforcement.

Under the new policy guidelines issued to Ogra, the private sector will be free to set up LPG air-mix plants on commercial considerations at their costs and liabilities provided the private firms meet Ogra’s licensing and operational requirements.

The government had earlier given the business of LPG air-mix plants to the two public sector gas companies – SSGCL and SNGPL – through subsidised schemes for far-flung areas about 6-7 years ago but the business could not flourish as envisioned owing to inherent resistance from operators and problems in subsidy settlements. On the other hand, a few private-sector LPG AMPs have secured a reasonable consumer base.

The LPG supply preferences or dedication mentioned in clause 3.6.7 of the LPG Policy 2016 dealing with 10pc compulsory allocation of local LPG to local air-mix plants will not apply to LPG AMP developed by the private sector. The said clause required that all local LPG producers in Khyber Pakhtunkhwa and Punjab will dedicate 10pc of their production to LPGAMP and Marketing Companies for exclusive distribution in these areas. Similarly, all local LPG producers in Sindh and Balochistan will dedicate 10pc of their production to AMPs and marketing companies for exclusive distribution in Balochistan and rural Sindh.

Ogra will be overseeing, not regulating, the new business

Likewise, clause 3.1.1 of the 2016 policy that required public sector LPG producers to give LPG supply preference to gas utility companies for meeting the government’s socioeconomic agenda would also not be applicable in this case to LPGAMPs. The said clause required the public sector exploration and production (E&P) companies and refineries to give preference in the sale of LPG to gas utility companies for supply to AMPs in pursuance of the government’s socio-economic consideration for supply of fuel to domestic consumers.

In case gas companies are unable to lift the fuel, the LPG would be disposed of through a competitive bid process to the licensed LPG marketing companies on terms and conditions to be settled between the buyer and seller.

The existing LPG supply agreements of refineries and E&P companies shall, however, be honoured to the extent of their terms, read clause 3.1.1.

However, LPGAMPs would be entitled to purchase LPG in bulk at the producer’s price notified by Ogra from time to time. The new policy guidelines required that tariffs for LPGAMPs, developed and operated by the private sector, will be deregulated.

Moreover, the status of LPG AMPs Licensees would be the same as that of LPG storage, filling, distribution plan and they shall also be entitled to import LPG governed by the prevalent trade policy of the government and any other applicable policies, laws or rules, regulations and directives of the federal government.

The LPGAMP licensee or developer or owner of the housing society shall not prohibit the consumers or suppliers from switching to alternate competing fuels supplied by a third party be it of piped natural gas or LPG cylinders, another LPG Air Mix Plan or virtual LNG project etc.

Published in Dawn, May 30th, 2023