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Sunday March 03, 2024

Govt prepares draft policy with tax incentives to encourage production of LPG

All producers are to develop a transparent pre-qualification criterion for the auction of LPG, to be followed by all marketing companies

January 21, 2024
Labourers unload gas cylinders from a truck at a market on the outskirts of Islamabad. — AFP/File
Labourers unload gas cylinders from a truck at a market on the outskirts of Islamabad. — AFP/File

ISLAMABAD: The government has formulated the draft for the LPG Policy 2024 with a 10-year tax holiday, 5 percent GST instead of 18 percent and zero import duties and taxes on imported plants, machinery and equipment.

“We have prepared the draft and the next step is to take stakeholders’ inputs to further fine-tune the LPG policy,” a senior official of the Energy Ministry told

The News.

“The Petroleum Division has formulated the draft with a huge tax incentive for encouraging the production of domestic LPG in the country and to this effect a 10-year tax holiday has been proposed with 5 percent GST against the current 18 percent GST.”

Apart from this, the official disclosed that the proposal of zero import duties and taxes on imported plants, machinery and equipment under SRO 678 (1)/2004-FBR has been made part of the draft of the LPG policy. “In addition, the zero advance income tax has also been proposed in the draft of the LPG policy instead of the current levy of 5.5 percent and, more importantly, the proposed 5 percent GST would further be gradually reduced to 1 percent annually.”

The official said that top mandarins of the Petroleum Division would seek the concurrence of the Finance Division on the tax incentives proposed in the LPG policy draft and to this effect, the summary of the LPG policy will be circulated to ministries and divisions as required in the rules of business, 1973 for their input on the draft.

Moreover, State Owned Enterprises (SOEs) will be facilitated for partial exemption from PPRA rules, 2004. The Petroleum Division is also in the process of the stakeholders; consultation including the existing license holders.

The Petroleum Division would update the next SIFC’s Executive Committee meeting participants. After the inputs from all stakeholders and concurrence of the Finance Division on the proposed tax incentives, the LPG policy would be pitched to the Council of Common Interests (CCI) for approval.

The existing LPG producers have also been proposed to dedicate up to 10% of their production to Sui companies for LPG Air-Mix Plants(s) developed and operated by them and 5% to Marketing Companies (MCs) for supplies in AJK and GB.

The remaining production will be marketed through their distributors and subsidiaries without resale to any other MC(s) or their distributors and the remaining quantities will be disposed of through competitive bidding under a deregulated pricing regime.

All producers are to develop a transparent pre-qualification criterion for the auction of LPG, to be followed by all marketing companies. The signature bonuses mechanism will be eliminated. All producers shall pre-qualify marketing and distribution companies once a year.

For marketing distribution, MCs will be obligated to market their LPG quantities on their own and will not be allowed to resell to any other MCs to avoid cartelization, windfall profits, impede competition and market distortion.

SNGPL and SSGCL shall enhance their market presence by the development of the retail network. The explosive department will develop strong inspection regimes for marketing companies and its distributors and provide quarterly monitoring feedback to Ogra.