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WEEKLY
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| Local, imported LPG price difference narrows down |
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Thursday, April 16, 2009
By Mansoor Ahmad
LAHORE: Liquefied petroleum gas prices have stabilised as the difference between locally produced LPG rates determined as per directive of the Oil and Gas Regulatory Authority and imported gas has narrowed down.
The OGRA has made it mandatory for the local LPG producers not to market the LPG above the LPG CP rate of ARAMCO Saudi Arabia. The current CP rate in Saudi Arabia is $402 per ton after which all the local LPG producers reduced their rates to Rs37228 per ton that translates in to Rs440 per 11.8 kg cylinder.
The LPG importers pay some premium on $402 to importers having storage facility at the port, which pushes up the cost to Rs43,898 per ton. The cost of 11.8 kg cylinder comes to Rs518.00. This is only Rs78 per cylinder higher than the local cylinder. In fact one importer has in fact offered guaranteed supply of LPG at Rs515 per 11.8 kg cylinder for the next four months to many distributors.
The distributors obtaining gas from local producers are currently selling the 11.8 kg cylinder for Rs650 in Lahore. They earn Rs210 per cylinder that includes the transportation, handling and retail commission cost.
Distributors buying LPG from the importers earn Rs182 per cylinder that also includes the cost they have to bear on transportation, handling and retail commission.
Marketing experts point out that the local producers now enjoy an edge of 10-13 per cent over the importers. This is because the LPG sale in the local market is linked to its global price.
They said that the regulations imposed by OGRA are now proving effective. They said that the LPG importers now get a fair chance to compete with local producers. Experts said with increase in LPG demand for electricity generation even this difference would become irrelevant.
In fact they pointed out that government has allowed establishment of an LPG run rental power of 305 MW. They said the plant alone would consume over 1100 ton of LPG daily, which is about 70 per cent of the total LPG produced in Pakistan. The demand for imported LPG would therefore rise to unprecedented levels and the competition of LPG with local producers would become irrelevant.
The local producers and the importers have in the past been at loggerhead with each other on the distribution price of 11.8 kg cylinders of LPG. The importers have in the past been complaining that the local producers under cut their rates in order to discourage imports that are expensive.
In fact the LPG importers went on to put an unreasonable demand of binding the local producers to sell the LPG in the local market at above the imported price of LPG.
The LPG producers in their defence point out that LPG imports in the past has never exceeded 47,000 tons in one year. This they say is only 7.5 per cent of 6,20,500 ton of LPG produced locally every year (average daily production of 1,700 ton per day). They said imports are not a threat to the local LPG producers. In fact they added the local producers also import LPG during winter when the demand exceeds local production.
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ISSN 1563-9479 
