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August 29, 2018

State-owned companies charge excessive LPG prices


August 29, 2018

ISLAMABAD: State-owned oil and gas companies are charging more than the maximum permitted price for liquefied petroleum gas (LPG), despite an order by the Oil and Gas Regulatory Authority (OGRA) declaring the practice illegal, according to documents obtained by The News.

“Pakistan Petroleum Limited (PPL) continues to charge a premium of Rs. 13,501 per metric tonne over and above its base-stock price,” wrote Farooq Iftikhar, chairman of the LPG Association of Pakistan (LGPAP), in a letter to OGRA. He enclosed an email from PPL asking for a payment exceeding the maximum price notified by OGRA.

According to the the letter, members of the LGPAP said that the extra Rs. 13,501 per tonne translates into a Rs200 increase in the price of a domestically usable 11 kg cylinder. It is for this reason that marketing companies have been campaigning for the award of LPG supply contracts to traders who would grant the largest discount to the consumers, so as to ensure the availability of clean fuel to housewives in remote areas of the country who do not have access to piped natural gas. Signature bonus payments were prohibited by OGRA on June 22 , when the Authority decided: “LPG producers, in public or private sector, cannot charge signature bonus, in compliance to LPG Policy in letter and spirit.” “The OGRA observes that the charge of signature bonus results in the increase in the producer’s LPG base-stock price, escalates the market price and may exceed the maximum producer price notified by OGRA. This impairs the consumers’ interest and policy provisions which focus that LPG is a poor man’s fuel, accordingly it must be at affordable price limits,” reads the regulator’s decision. Pakistan’s biggest producer of LPG, Oil & Gas Development Company (OGDCL) recently offered to a dozen LPG marketing companies five times the quantity of LPG they have contracted to lift from Adhi gas field on “standard terms and conditions”.

The “standard terms and conditions” turned out to be an arrangement announced on April 3, which requires buyers to pay the notified maximum price plus a signature bonus amounting to Rs8,220 per tonne. The former prime minister, Shahid Khaqan Abbasi, who worked as petroleum minister for the full term of the previous government, justified the charging of signature bonuses at one of his last press conferences on May 30. He may not have realized that the additional charge of “an average of Rs. 13,000 per metric ton” did not go to the national kitty, as he claimed. The former premier had implied that if state-owned companies did not extract the extra sum of Rs. 7.5 billion annually, it would have gone into the pockets of the marketing companies.

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