KARACHI, Oct 7: Market players involved in the business of Liquefied Petroleum Gas (LPG) have now approached the government for temporary waiver of general sales tax and customs duty on the import of LPG in order to meet the demand and supply gap of 10,000 tons of gas for the next three months.
Cut in taxes on import will also help in removing the on-going price disparity between imported and locally produced LPG in the market. They think that the demand of LPG is set to escalate in winter as well as in Ramazan, and the government should consider removal of sales tax and customs duty on import of LPG for just three months.
The chairman LPG Association of Pakistan (a body of LPG marketing companies), Iqbal Z. Ahmed told Dawn on Thursday that based on rising price of LPG at $480 per ton (C&F Karachi), imports are not viable for marketing companies.
To overcome the problem and to ease pressure on LPG prices, the association has urged the government on October 5 to lift the customs duty of five per cent and 15pc general sales tax on LPG imports for the next four months.
He said that Pak Arab Refinery Limited (Parco), Oil and Gas Development Company Limited (OGDCL) and others, if found suitable by the government, may be directed to import LPG to meet the shortfall and sell it to the marketing companies giving preference to those companies who have imported the LPG in the past and arrange price in such a manner that the price differential between the imported and local LPG remains at around Rs5,000 per ton.
He said that this would enable the market to be stabilized and it is a temporary measure only. Once the local production comes on stream in November, December and January, the problem of availability of LPG will be solved for the near future and prices will be at a normal level acceptable to consumers of the LPG, he said.
In reply to a query, he said that the government's decision of cutting the LPG price by Rs95 per cylinder (11.8 kg) does not cover the imported gas, instead it related to the locally produced gas.
Meanwhile, market sources said that the OGDCL has informed to around 10 marketing companies that the trial production of LPG from Bobi Gas Field will commence soon. It is expected that during the trial production period 80-100 tons a day of LPG would be available for sale on purely temporary basis.
The OGDCL had informed the marketing companies that they would be entitled to receive one bowzer of 18 ton on turn basis against advance payment at prevailing price of LPG which is Rs17,000 per ton as base price, Rs82 as central excise duty and Rs2,562 as GST, making total of Rs19,644 per ton.
Some five marketing companies will also become entitled for the delivery of LPG from Bobi field once they get the valid LPG Marketing Licence, the sources said. The sources said that some of the problem relating to demand and supply is likely to be bridged with the arrival of LPG from Bobi field.
They said that most of the gas will arrive in Karachi. However, there will still be a shortage of 150 tons a day of LPG. Production of LPG in Pakistan stands at 1,000 tons a day in which Pak Arab Refinery Limited and OGDCL share 450 tons and 200 tons respectively.
Iqbal Ahmed said gas importing companies have to pay $40-60 per ton as freight charges, $20 per ton unloading charges, five per cent customs duty and 15 per cent sales tax. The only way to bring down price of imported gas lies in the temporary waiver of customs duty and general sales tax.
The chairman, LPG Distributors Welfare Association, Hadi Khan thinks that the imported LPG cylinder price, which is currently brought at the rate of Rs475-480, can be curtailed to Rs405-410 in case the government withdraws customs duty and general sales tax.
He said that price for October arrival of imported gas, arriving from a ship, is being quoted at Rs480-490 per ton while the gas which arrived in September was priced between Rs465-475 per cylinder.
Besides, there is also a disparity in price of local cylinder, which currently ranges between Rs375 to Rs385. In local market, LPG price has dropped to Rs37-38 per kg from Rs43 per kg soon after the government's decision of reducing the price by Rs95 per cylinder.
Hadi said that Ramazan and winter season are crucial as demand usually pick up in these seasons. He asked the prime minister either to issue instructions to the producers to increase their production or cut sales tax and customs duty on the import of LPG to meet the demand.