ISLAMABAD-The Competition Commission of Pakistan (CCP) has prepared a draft competition assessment study of the LPG sector in Pakistan with solid recommendations for the government to introduce policy reforms, remove regulatory barriers, and put in place a competitive LPG pricing framework to create a level playing field and promote competition in the sector.

The CCP is mandated under Section 28 of the Competition Act, 2010 to conduct studies for promoting competition in all spheres of commercial and economic activity. The draft study on the liquefied petroleum gas (LPG) sector has been uploaded on CCP’s website for soliciting public comments within 30 days.

Competition assessment of the LPG sector shows various barriers to entry and expansion that restrict/reduce and distort competition in the sector at various levels. Natural barriers include high capital and financial requirement in the upstream LPG production/extraction, illiquid market, and seasonal fluctuation in LPG demand, while regulatory barriers arise due to certain contradictory clauses in the LPG Policy, 2016.

Under Section 3.4.3 of the LPG Policy, public sector companies will import LPG to meet the domestic demand as per the quantity decided by the federal government. Whereas, Section 3.5.1 of the same Policy contradicts this section by allowing any party having valid OGRA marketing license to import LPG. Since there is no petroleum levy and there is lower GST on LPG import, the private sector finds it profitable to import LPG without the need/demand assessment. Additionally the gains of the importer in the form of a better imported LPG price is not passed on to the end consumer, as the marketing companies match the indigenous LPG price.

The study recommends to the government to remove the above ambiguity by undertaking proper assessment of demand in consultation with the private sector and the sector regulator. It also recommends rationalising the GST and import duties on LPG.