ISLAMABAD - The Government of Sindh has showed its serious reservation to the draft Liquefied Petroleum Gas (LPG) Policy 2015, and said that the government regulation of LPG prices is against the essence of Petroleum policy 2012 and will harm future investment in Exploration and Production sector.

According to the Sindh government, the draft LPG policy 2015 is against the essence of Petroleum policy 2012 which stipulates at Para 10.1.13 that “for new projects LPG producers price will be deregulated subject,” Sindh government said in a letter to the federal government. In a letter which is available with The Nation, the Sindh has blamed the federal government for creating the monopoly of the public sector companies in the LNG sector. The draft LPG Production and Distribution Policy 2015 envisages abandonment of the deregulated pricing regime for LPG. The Ministry of Petroleum considers LPG business’s deregulation as a sole reason for sudden jump in its price and therefore a summary for its regulation has been send to the CCI. “After the regulation OGRA will determine the LPG price and the final LPG consumer price will be at Rs895 per cylinder and will end the frequent price hike of liquefied gas prices,” according the summary submitted, by the federal ministry of Petroleum and Natural Resources to the CCI.

CCI is a constitutional body formed to resolve the power sharing disputes between the federation and provinces.

The Sindh government is of the view that the energy policy divides LPG into locally produced LPG and imported LPG but the draft LPG policy is completely silent over the price control mechanism for the costly imported LPG. "It is feared that regulation of local LPG may impede the import of LPG in the country as in regulated regime private importers find less attraction to invest because of low returns and this fact is clearly visible in the draft policy 2015 which suggests public sector companies to import LPG to meet demand-supply gap,” the Sindh government correspondence said.

Similarly the government of Khyber Pukhtunkhwa has also demanded of the federal government that the draft policy 2015 must address the provincial government concerns regarding LPG. According the KP stance the policy must incorporate article 158 of the constitution in the proposed policy. According Article 158 of the Constitution “the province producing LPG shall use this utility to fulfill its needs and the excess LPG may then be supplied to other provinces after the approval of the producing provinces”. Similarly the KP government also demanded that in case the Private Sector Exploration & Production Companies are unable to set up LPG extraction plant as per provisions of its Petroleum Concessions Agreement (PCA), its right of LPG extraction would stand surrendered to the Provincial Government who can get it extracted through a competitive bid process.

The Oil and Gas Regulatory Authority will regulate and notify the prices of indigenous LPG, subject to Policy Guidelines of the Provincial Government, including producers’ Price, Margins of Marketing and Distribution Companies and Consumer Prices, the KP government said.

The KP government also demanded that the Exploration & Production companies shall pay Royalty on LPG and the government shall collect Gas Development Surcharge (GDS) from local LPG Producers in accordance with Article 161 (1a) of the Constitution of Pakistan.

OGRA should take the provincial government and local administration on board to take action against the violator of pricing formula for taking punitive action against the defaulting Marketing Companies and Distributors, the KP government demanded.