LPG policy’s non-implementation real problem

 Only audit of gas companies won’t work and gas consumers will continue to suffer due to high prices

2018-09-06T01:55:31+05:00 Fawad Yousafzai

ISLAMABAD - Failure of the federal government to implement LPG Policy 2016 is the main reason for the high prices of LPG for the consumers.

The government has directed OGRA to conduct an audit of the LPG companies however it is unlikely to achieve any milestone unless the LPG Policy 2016 is implemented in letter and spirit, official sources told The Nation. The non-implementation of LPG policy 2016 and the imposition of Regulatory Duty on the imported LPG gas landed the LPG consumers in the current crises. It is pertinent to mention here that the LPG prices doubled in the country during past one month. Recently, LPG mafia increased LPG price for 4th time. Prices have reached record 210 per kg in Gilgit Baltistan & other northern areas, Rs 190 in AJK, Nathiagali etc and Rs 170 per kg in Jhelum, Multan, Rajanpur and Swat etc. The prices during the same period last year were around Rs 80 to Rs 100 per kg.  “A mafia in the petroleum division is taking the line of the local LPG producers and is not implementing the LPG Policy 2016 which has resulted in an increase in the LPG prices,” official sources said.

A meeting on the issue of LPG price increase was held in the Petroleum Division where it was agreed that an audit may be carried out to ascertain the LPG production cost of producers and LPG marketing and distribution margin, for setting the reasonable producers and margins to address LPG pricing issue. As all the LPG companies are the licensee of OGRA, it is therefore requested that OGRA will conduct third party audit both for the production cost of the producers and marketing/distribution margin keeping in view relevant factors in order to rationalise the producer price and marketing and distribution margins for LPG prices.

However, the official said that only audit of the companies is not going to work as LPG Policy 2016 has clearly evolved the mechanism for the LPG business. As per the LPG policy 2016, “Subject to policy guidelines of the federal government, the OGRA will regulate and notify the prices of indigenous LPG including producers price margins of marketing and distribution companies and consumers prices,”.

The policy has clearly stated: “The government may charge a Petroleum Levy from local LPG producers as provided in the Petroleum products (Petroleum Levy) Ordinance, 1961, as specified from time to time by the federal government.” “The federal government will from time to time in consultation with OGRA and relevant stakeholders, determine the quantity of LPG to be imported to meet any gap between demand and supply; this quantity will be imported by public sector companies. Petroleum Levy on LPG or Gas Infrastructure Development Cess(GIDC) may be utilized to subsidies the LPG imported by public sector companies for bringing the prices equal to the local LPG prices for domestic sector supplies,”.

LPG prices will be regulated with a maximum price at all levels of the supply chain. However, the producers, marketing companies and distributors may sell below the maximum price determined from time to time, said the policy. Ogra will intervene in case of deviation from the above pricing basis and would also involve the local administration to ensure punitive action against the defaulting marketing companies and distributors. However, instead of encouraging the government owned companies to import LPG, currently all the imports are coming through private companies. Besides the connivance of the local LPG producers and the petroleum division, private companies involved in the LPG import business also exploit the situation. Since only private companies are involved in the import of LPG therefore they park their vessels on sea port and create an artificial supply demand gap which results in the increase of LPG prices and then they are getting the desired rates, the official explained.

In violation of LPG policy government has imposed Rs 4669 regulatory duty on per MT of imported LPG. Petroleum Ordinance 1961 empowers the government to impose levy on locally produced/extracted LPG at the rate of Rs 4669/per MT. However there is no such provision for the imported LPG, said chairman LPG distributor Irfan Khokhar while talking to the scribe. He said that as per Petroleum product Ordinance 1961 and LPG policy, 2016, levy can be imposed only on local production of LPG and not on the imported one. He said that to discourage import of LPG first the government has imposed advance tax of 5.5 percent on LPG and later they imposed Regulatory Duty which has discouraged the import and resultantly increased the demand supply gap. He alleged that the local LPG companies are dictating the policies of the government officials which is hurting the consumers.


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