LAHORE, Aug 30: The LPG Association of Pakistan (LPGAP) has condemned efforts to revive the policy of equating local LPG producer prices with the Saudi Arabian export rates.

At a meeting of the Federal Cabinet held a few days ago, a summary called for the “import parity formula to be introduced in LPG on the Saudi Aramco upper cap for ensuring availability.” This proposal to revive the failed policy of the previous government was rejected at the meeting.

In January 2007, the then prime minister, Shaukat Aziz, had ordered equating of the local LPG production prices with Saudi Arabian export prices, claiming that this would lead to lower end-consumer rates and an increase of 250 per cent in LPG availability in Pakistan.

“For 11 months in 2007, the local LPG producer prices were artificially equated with Saudi export prices despite the fact that 95 per cent of the LPG available in Pakistan is locally produced, primarily through natural gas processing,” said LPGAP spokesman Fasih Ahmad.

“This policy led to an increase of 60 per cent in consumer prices and a net increase of a meager 0.25 per cent in the gas availability despite outrageously bullish predictions,” he said, adding that the previous policy was “a failure by any measure.”

Under the previous policy, the Oil & Gas Regulatory Authority (Ogra) began setting the LPG producer prices on a monthly basis until November, when the policy was finally discontinued.

According to the current policy, the LPG producers are free to set their own prices provided they do not exceed the published Saudi Arabian export price at any time. The LPGAP says the previous policy was aimed at providing undue advantage to a handful of LPG marketing companies.

“The advocates of the previous policy had succeeded in convincing the previous government that LPG could only be imported at published Saudi export prices,” said Fasih. “This is untrue since the Saudi Aramco Contract Price is a notional benchmark and imports can be purchased at discounts from the international market.”