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| Govt asked to restore LPG import parity price |
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Wednesday, February 27, 2008
KARACHI: The government must revert to the policy of linking the price of locally-produced liquefied petroleum gas (LPG) with its import parity rates to stabilise supplies in the market and stop erratic price fluctuations, an industry official said.
A cap on the producer price of a deficit fuel that is deregulated at the retail end has discouraged imports and encouraged black-marketing, said Abbas Bilgrami, Managing Director of Progas, the company that operates the only LPG import terminal in the country.
“When LPG produced in the country is being sold at a price much lower than its imported cost why would marketing companies want to import?” he questioned during a media briefing at the terminal site Port Bin Qasim on Monday. “Not every company has quota from domestic resources (producers) and thus they buy it from LPG marketers, who have the quota, but at a premium over cost.”
The complex market of LPG, which is officially regarded as a poor man’s fuel, is based on a system of fixed allocations from local producers. Out of 63 licensed marketing companies, 23 have little or no such quotas. These companies including multinational Shell Gas rely on imports to compete.
Imports recorded a 49 per cent rise from 1999 to 2006 and surged to 65,000 tonnes in 2006-07 as demand surpassed supply. The phenomenal rise in imports was a result of government policy which linked the price of locally-produced LPG with international benchmark Saudi Aramco rates.
Recently, Bilgrami said the policy was altered such that it now discourages imports. “Production has been more or less stagnant and consumption has been increasing by 14 per cent annually. Imports must be made feasible.”
In November 2007, Economic Coordination Committee (ECC) changed the pricing policy hardly after a year, withdrawing the authority from Oil and Gas Regulatory Authority (Ogra) to publish monthly producer prices based on Saudi Aramco rates. Producers, which include state-owned gas exploration and production companies and refineries, were allowed to fix the price that should not exceed the import parity rates.
The step was taken to stop the effect of rising international rates to local market. “But the price shot up drastically during December and January,” Bilgrami recalled, suggesting reason for that was a supply crunch in absence of imports. After the alteration in policy, LPG retail rates rose to Rs70-Rs125 per kg in Karachi and Lahore. Prices have come down but not to the level normally observed in autumn. Producers are charging conveniently more than last year and without competition from importers, few small marketers are making safe profits.
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ISSN 1563-9479 
