Govt urged to relink local, global LPG prices

LAHORE: All Pakistan Liquid Petroleum Gas Association has urged the government to relink the prices of locally produced LPG with Saudi Aramco LPG rates, the global standard rates, in order to avoid further damage to national exchequer.
Chairman All Pakistan LPG Distributors Association Farooq Iftikhar has revealed that the price of locally produced LPG is around Rs47500 per MT, while imported price is around $38 or Rs3918 per MT and, “Imported gas is preferred over domestic gas as it is very cheap.”
He said in August 2014, the global LPG rates were $832 per metric ton and the oil well price of local producers was at the same value in rupee terms.
“LPG rates in Gulf and Saudi Arabia declined $479 per MT in March 2015, after which the government delinked the LPG prices,” the chairman said, adding that instead of passing on the benefit of lower LPG rates to the consumers, the domestic oil well price of LPG was fixed at Rs65585 per MT which was almost 1.8 times higher than Saudi CP price.
However, the higher prices have not benefited the domestic producers much, as locally produced LPG can only be sold to the producers that have been allotted monthly quota. Moreover, the signature bonus is very high averaging Rs40 per cylinder, which the producers have taken from the distributors.
The quota holders have to buy their monthly quota otherwise they have to pay a heavy fine, which is already with the producers in shape of bonus signature, he said. But, the dilemma is that the local production of LPG in Pakistan is much higher than allotted quotas and, “The quota holders are not bound to buy the surplus.”
Further, non quota holders naturally go for cheaper imported LPG and do not buy the local surplus LPG either. It is ironical that bulk of the LPG is produced by the public sector companies and they have to close down production periodically causing loss to the national exchequer.
The chairman further said that quota holders are also in a fix, “They buy imported as well as local LPG to lower their prices.”Those that sell imported LPG only sell at profit and those that mix local and imported LPG simply reduce their losses, he said.
The distributor told that another worry for the LPG producers and distributors is that Iranian LPG is coming into Pakistan in large quantities. This gas is much cheaper than LPG supplied by other producers in the Gulf. “Earlier, it was routed through Dubai where documents for the origin were changed; now, the vessel comes directly to Karachi but documents are still changed to show it of non-Iranian origin because sanctions on Iran are still in effect.”
“This cheaper gas is further reducing share of domestically produced LPG,” he added.
Iftikhar said the absence of the writ of the government in implementing OGRA rules is impacting genuine LPG distributors. Under the OGRA rules, a distributor can fill gas in its own cylinder colour and specification of which are sanctioned by OGRA. After difference in local and imported LPG rates, many distributors have suspended their business and have outsourced their filling facility to small investors that buy imported gas and fill it in cylinders of other companies. This gas usually is substandard and bought at very low rates and it tarnishes the image of the company whose cylinder was illegally filled.
Therefore, the government should link back the rates of local LPG with the Saudi LPG rates to ensure maximum use of domestic gas that would also provide a fair chance to both domestic and imported LPG, the chairman concluded.