ISLAMABAD, Oct 9: The federal government has directed the liquefied petroleum gas (LPG) companies to reduce consumers prices by at least 20 per cent and base future pricing on six monthly revision in advance.

Official sources said that these directives have been issued under rule 18 (2) of LPG (production and development) rules 2001 following inability to implement a two month old decision.

The LPG companies had expressed their inability to revise their prices on six monthly basis “because of fluctuation of dollar rupee conversion rate and non-fixation of LPG producer price on six monthly basis”.

The producers are now required to notify LPG base stock price for a period of at least six months in advance. Furthermore, the producer should exercise take or pay clause of their LPG sale purchase agreement to maximize the uplift of LPG by the marketing companies.

Under provision of rule 18 (2), the government is empowered to determine a reasonable price of the LPG base stock and LPG in accordance with the prevailing policy of the federal government.

The present LPG producer price is US $203 per ton and the consumer price is between Rs230 and 250 per domestic cylinder of 11.8 Kg.

Secretary petroleum M. Abdullah Yousaf had advised the representatives of LPG producers/oil refineries and marketing companies in August this year with an objective to overcome the prevailing LPG-surplus syndrome.

With this the LPG prices should have come down from existing Rs230/250 per cylinder to Rs180/190 per cylinder, these sources said but deplored this did not happen.

Though the government is now out of the LPG pricing business after its deregulation early last year, it had promised the producers and distributors to raise their prices to international level gradually touching $223 per ton by June 2002.

At present, local prices are equivalent to around $203 per ton. The base price, under the understanding, has to be worked out only on monthly contract price for Propane and Butane announced by Saudi ARAMCO and published in the international Propane-Butane Newsletter/Middle East Economic Survey.

The situation however changed when LPG production from newly established Pak-Arab Refinery Limited (PARCO) last year resulted in surplus. Currently distributors could lift only 65 per cent of the stock though far flung areas like Azad Kashmir and Northern Areas were still getting short supplies. Consumption level has also declined due to higher prices and hot weather conditions.

Against a total capacity of 9,000 tons per day, all the public and private sector refineries and LPG producers have brought down their production to around 500 to 550 tons per day. The remaining portion is either being flared up or mixed up with the furnace oil.

Before deregulation early last year, there were 2,653 distributors of LPG with 1.58 million consumers and 2.3 million cylinders. The number of distributors have increased to 3254 with number of consumers and cylinders climbing up to 1.87 million and 2.7 million respectively. The government has already allowed producers to export 60,000 tons LPG.