ISLAMABAD -  As against the petroleum ministry recommended prices of Rs1,100 per 11.8kg LPG cylinder, the Oil and Gas Regulatory Authority (Ogra) on Friday determined that for the month of February the prices of LPG will be Rs910 per cylinder.

In two separate letters to the LPG producing and marketing companies, written on February 24, Ogra has directed that “in pursuant of the order of the Lahore High Court, dated January 27, 2017, Ministry of Petroleum and Natural Resources proposal/opinion vide letter No LPG 6(11)/2016-policy date February 6 and 10, the producer price (including Excise Duty) is Rs45,276 per MT, while the marketing companies maximum LPG price (Including GST) is Rs77,220 per MT or Rs910 per 11.8kg LPG cylinder. The consumer LPG price is conveyed as per section 18(2) of LPG Rules 2001 for strict compliances.”

Earlier this month, the Ministry of Petroleum and Natural Resources in a letter to Ogra proposed that the maximum LPG consumer price will be Rs93,500 (Rs1,100/11.8Kg cylinder) including the base stock price at Rs59,190 per MT, GST 17 percent and the balance as marketing and distribution margin at Rs20,724 per MT.

Instead of blindly following the ministry directives, Ogra has made its own calculation by analysing the data of Saudi Aramco prices, official sources told The Nation. Saudi Aramco price provides a benchmark against which Middle East sales of liquefied petroleum gas (LPG) to Asia are priced.

“The ministry has made its calculation by following one month LPG prices of the Saudi Aramco, while the Ogra has taken into consideration the three month prices of Aramco,” the official explained. After analysing the Saudi Aramco LPG prices for the past three months, Ogra has determined that the prices of LPG will be 77,220 per MT or Rs910 for 11.8kg cylinder, official maintained.

Giving the detail account, the official said that in compliance of the order dated January 27, 2017, of Lahore High Court in WP 113/2017 wherein Ogra was directed to decide the matter of LPG pricing, Ogra conducted hearings of parties (PPL, Gold gas etc) and keeping in view of MP&NR’s advices from time to time, in this respect as well as legal framework, in order to assess the reasonability of LPG prices, Ogra sought audited accounts for last three years from the LPG producing companies. MP&NR on February 9, 2017 and February 10, 2017 proposed LPG prices and advised Ogra to proceed further with the objective to safeguard the interest of domestic consumers. In the above referred letters maximum LPG consumer price has been proposed at Rs93,500 (Rs1,100/11.8Kg cylinder) including the base stock price at Rs59,190 per MT, GST 17 percent and the balance as Marketing & Distribution Margin at Rs20,724 per MT.

OGRA asked LPG producing companies to submit the detail of revenues and cost in respect of their LPG business segment. However, the companies submitted that no specific requisite data is available since LPG is a by-product of crude oil extracted during the refining process; no fractional/separate accounts are maintained in this regard. Resultantly, no adequate data is available to extract the meaningful information to ascertain the cost of LPG base stock. In this scenario, CP Price (Saudi Aramco) and LPG base stock price quoted by LPG companies is the only available data to determine the reasonability of LPG price.

The official said that after extensive deliberation, Ogra observed that LPG consumer price is an aggregate of indigenous base stock price or imported C&F price, LPG Marketing and Distribution Companies’ Margin and applicable Government taxes/levies. There is no specific parameter or reliable data, in terms of consistency and uniformity, to determine an accurate LPG price. Furthermore, a uniform price applicable across the country cannot be determined owing to inherited limitations ie different freight from the source to consumer destination, base cost from different sources etc.

However, a maximum LPG indicative price can be determined to set a ceiling in order to comply with the legal provisions and honorable court orders in the instant matter. It has been observed that MP&NR proposed latest LPG producer price at Rs59,190 per MT, however at the same time the price as quoted by LPG producers stands at Rs54,000 per MT. This deviation in LPG producer price required further analysis to arrive at a reasonable limit. In view of above, historical data with respect to quantity of LPG (local & import), LPG base stock price quoted by local producers, CP price quoted by Saudi Aramco, has been considered and analysis based on the data for past 12 months (February, 2016 to January, 2017) reveals that LPG local producer price is relatively observing market dynamics and CP price by Saudi Aramco. The LPG local producer price as such does not have its own set of parameters to compute the same, as submitted by LPG producers. Therefore, at this point in time, average of last three months CP by Saudi Aramco which works out to Rs45,276 per MT may be considered relevant data for the determination of February 2017 LPG price.

MP&NR has been of the view that this margin is relevant to market conditions. On the basis of above, the latest margin conveyed at Rs20,724 per MT by MP&NR is adopted for the purposes of LPG price for the month of February, 2017. Although the new prices for the month of February are provisional, however it will enforce till the new determination of LPG prices, the official added.