ISLAMABAD: After a decrease in the prices of propane and butane by Saudi Aramco, Pakistan, being an importer, slashed on Friday the prices of liquefied petroleum gas (LPG) by around Rs49 per kilogram for domestic and commercial consumers for April 2023.
Now one kilogram of LPG would be available for Rs229/kg in the open market in April against the price of Rs278/kg in March. The Oil and Gas Regulatory Authority (Ogra) regulates the price of LPG and it carries out periodic adjustments on the basis of changes in the international market prices and other factors.
For April, the Regulator has set the prices of an 11.8kg domestic cylinder at Rs2702.2 against Rs3277.7 in March, with a Rs575.5 or 17.56 per cent cut over the previous month. The price of commercial cylinder (45.4kg) would reduce by Rs2214 and now it would be sold for Rs10,397 in April 2023 against the price of Rs12,611 in March 2023.
Despite being the regulator, Ogra mostly fails to check black-marketing of the fuel. In March, the government price was Rs278/kg, but gas was sold for over Rs400/kg in parts of the country. The regulator, with its headquarters in Islamabad, even fails to enforce its notified prices in the capital city.
Pakistan imports LPG from Saudi Aramco, a Saudi Arabian national petroleum and natural gas company, and Pakistan is one of its key customers.
The Aramco had cut the propane and butane contract price (CP) to Asia for April 2023 by $165/ton a month ago to $555/tonne and butane CP was also lowered to $545/tonne, down by $195/tonne. Propane and butane are two major components of LPG, which the Middle Eastern oil producers sell to Asian countries. In Pakistan, LPG applicable prices are calculated on 40:60 ratio of propane to butane.
Pakistan also imports LPG from other countries including Qatar, UAE and Iran. The price of LPG is influenced by various factors such as international market prices, exchange rates, transportation costs, taxes, and government regulations.
The current drop in price could be attributed to increased supply from the Mideast Gulf region in April after maintenance ended at Saudi Arabia’s Yanbu and Ruwais ports, as well as fading seasonal demand from northeast Asia.
As per the Ogra calculation, the producer price of LPG has been determined at 154,398.25/ton. This price included Excise Duty of Rs85/ton and excluding the petroleum levy of Rs4,669/ton. The marketing/distribution/transportation margin has been set at Rs35,000 per ton (Marketing margin of Rs17,000/ton, distribution margin of Rs10,000/ton and transportation margin of Rs8,000/ton) or Rs413 per cylinder.
Prior to imposition of an 18pc general sales tax (GST), the producer price would be Rs159,067.25/ton, while the price of 11.8kg cylinder will be Rs1877 per cylinder. Additionally, the GST at the rate of 18pc on Rs159,067.25/ton would be Rs28,632.1/ton or Rs337.86 for an 11.8 kg cylinder. The maximum producer price with GST would be Rs187,699.36/ton or Rs2,214.85 per cylinder.
It must be a matter of concern that the consumers are being double-taxed, as they have to again pay 18pc GST of Rs6,300/ton or Rs74.34 per 11.8 kg cylinder on the marketing/distribution margin of Rs35,000 per ton.
Meanwhile, Chairman LPG Industries Association Irfan Khokhar said the country was already facing a gas shortage. He demanded the government deal the LPG industry just like the LNG sector, where there are no taxes on it. If the government would do so, LPG could be supplied to domestic consumers at lesser price than the piped gas, he claimed.
The government’s unjustified policies, coupled with a high number of taxes, had put a negative impact on the LPG industry, he added. Khokhar said the LPG distributors had been paying over Rs6 billion per annum under the head of taxes.
The government should waive taxes to ensure provision of cheaper LPG to consumers during the winter season, said Irfan Khokhar.
He demanded the government restart operation of LPG production plant of Jamshoro Joint Venture Limited (JJVL) in order to ensure supply of cheaper LPG on sustainable basis. He said the closure of JJVL Jamshoro plant had inflicted a loss of billions of rupees, in addition to a hike in LPG prices.