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According to the CCP decision likely to be announced on Thursday, a Rs278 million fine has been imposed on the Jamshoro Joint Venture Limited (JJVL), the country's largest LPG producer, and Rs40 million on the LPG Association of Pakistan (LPGAP) for collusive working leading to high LPG prices. The fine on JJVL amounts to 3.75 per cent of annual profit earned in 2007-08.
The decision was made by a CCP bench headed by chairman Khalid Mirza, and comprising Rahat Kaunain Hassan, member (legal) and Dr Joseph (member). The CCP also directed the JJVL to desist from restricting competition through limit-pricing.
”Ogra is strongly recommended to review its policy and implementation regarding 'reasonable consumer price' and ... directed to take necessary measures to ensure a level playing field for all stakeholders,” the CCP order said.
The CCP said “The JJVL and the LPGAP have formed a vertical cartel with the aim of fixing LPG prices.”
According to Ogra, LPG marketing companies bagged enormous profits.
The CCP said that marketing companies earned a profit of Rs489 on every 11.8-kilogram cylinder in January 2009.
The CCP observed that when JJVL stopped LPG supply, marketing companies were either forced to procure gas from other companies at very high rates or they had to import it.
Thirty-five of 71 LPG marketing companies had quotas with JJVL, while others were without any quota.
According to the commission's report, JJVL could easily manoeuvre between different LPG companies, but marketing companies “do not have much of a choice”. “They either work with JJVL or not work at all, and the JJVL, with Lub gas and Mehran Gas, can also act independently.”
It said “JJVL has vertically integrated distributors, Lub Gas and Mehran Gas, and it has also entered into vertical agreements with some 30 or so LPG companies downstream.”
The report said “We have found that JJVL's pricing decisions have the effect of excluding competitors at the producer level and LPGAP has engaged in price fixing at the downstream level which is illegal.”
The report said that the Lub Gas and Mehran Gas were virtually owned by Mr Iqbal Z. Ahmed, who is also the majority shareholder in the JJVL.
The report said that Mr Iqbal Z. Ahmed, the chairman of JJVL, is also the chairman of LPGAP.
Another common director, Fasih Ahmed, is Mr Ahmad's son. He is also the official spokesman for LPGAP. Many other directors of marketing companies were also directors of JJVL, the CCP said.
According to records of the Securities and Exchange Commission of Pakistan (SECP), Ishtiaq Asif, in addition to being the CEO of a marketing company, is also a director of JJVL, and Sadia Ahmed, Mr Ahmed's daughter, obtained 16 per cent and two per cent commission from Progas for LPG deals from JJVL.
The chairman of the LPG Distributors Association, Irfan Khokhar, said the LPG retail price, which has risen to Rs110 from Rs25 in 2006, was being increased while the local producer was still selling it for Rs9,000 per ton, or Rs9 a kilogram.
