21pc LPG price hike in 6 months causes uproar

ISLAMABAD: Amidst nationwide uproar over soaring prices of liquefied petroleum gas (LPG), the federal government on Saturday notified a further raise of Rs3,500 per metric ton in the producer price of LPG.

According to the notification issued by Oil & Gas Regulatory Authority (Ogra), which will be published in the next official gazette of Pakistan, the Petroleum Division of the Energy Ministry has increased the maximum price of a domestic cylinder to Rs1,613.

Latest revision in price will cause a domestic cylinder of LPG, which has been termed ‘poor man’s fuel’ by the Council of Common Interests and the Supreme Court of Pakistan, dearer by 21 per cent in just six months. Maximum price of a cylinder in February 2018 was fixed at Rs1,332.

“The increase is significant to affect the household budget of majority of low and middle income consumers of LPG and to force them to shift to alternatives that have serious and adverse impact on human health and the environment,” stated LPG Association of Pakistan in a letter to Ogra.

The latest revision is prompted by the price being pegged to Saudi Aramco contract price, an international benchmark price of LPG, contrary to the Council of Common Interests approved LPG (Production & Distribution) Policy of 2016,which stated that the linkage between international prices and domestic producer prices was one of the reasons why the policy of deregulating LPG pricing had failed.

“Taking cognisance of the issue, MPNR has reviewed the issue in its entirety and has concluded that the price deregulation has failed to achieve its intended objective of enhancing availability of LPG at affordable prices,” says LPG (Production & Distribution) Policy of 2016 as published in the official gazette in August 2017.

LPG Association of Pakistan has also advocated the cause of delinking price of indigenous LPG from the international benchmark, maintaining in a letter to Ogra a fortnight ago: “Producer prices of LPG are being kept on a par with Saudi Aramco CP in clear violation of the objective of LPG Policy 2016.” The increase in price in the period since February roughly equals the premium that the marketing companies are required to pay to the public sector oil and gas companies over and above the maximum price, despite the fact that it has been declared illegal by Ogra.

According to documents obtained by this correspondent, current producer price in excess of Rs77,000 ensures 200% profit for the producers even if their stance on cost of extracting LPG is accepted.

These increases are also attributed to the uneven sale of LPG produced at Nashpa Field in Karak district of Khyber Pakhtunkhwa, which has recently increased indigenous production of LPG by oil and gas companies significantly.