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August 11, 2020

Six summaries pushed to give LPG importers Rs30 bn annual benefits

Top Story

August 11, 2020

ISLAMABAD: The Petroleum Division and the Cabinet Committee on Energy (CCoE) have pushed six secret summaries in the span of three months to give to the importers of Liquefied Petroleum Gas (LPG) cumulative annual benefits in excess of Rs30 billion.

If made a part of the new LPG policy that the federal authorities are currently attempting to have the Council of Common Interests (CCI) approve at its next meeting, the tax and other fiscal benefits to importers may exceed Rs100 billion.

Summaries of the Petroleum Division, Cabinet Committee on Energy (CCoE) and Economic Coordination Committee (ECC) of the Cabinet obtained by The News suggest to exempt LPG imports from income tax, import duty, petroleum levy and sales tax.

Minutes of meeting of a committee constituted by CCoE on ‘sustainable LPG supply chain’ circulated last week confirmed that the meeting concluded with the chair emphasising the need for modification of LPG Policy of 2016. The meeting was informed that up to 80% work on modification of the policy had already been completed.

Summaries suggest that the central idea behind policy change is to deregulate prices. While canvassing deregulation of prices in aid of ‘sustainable supply chain’, the summaries also propose measures that will make locally produced LPG more expensive to sell and the imported LPG comparatively much cheaper.

The Petroleum Division and the various committees have recommended to zero rate income tax on sale of imported LPG, to slash withholding tax on imported LPG from the existing 5.5 to 0% for state-owned companies and 2% for private importers of LPG and to reduce the current discounted sales tax rate from 10% to zero in the case of public sector and 2.5 on private sector imports.

The summary to the ECC recommends raising Petroleum Development Levy (PDL) on local production of LPG from the current Rs4,669 to Rs8,571 per metric ton. The PDL, which comes to about 15% of the price of LPG, is not charged on imported LPG.

The summaries, working papers and LPG import statistics available to The News also suggest that the subsidies proposed by the CCoE and Petroleum Division have no financial or market data to support the view that more imports are required, that imports are currently not feasible or that such subsidies are essential to incentivising imports.

Import data shows that total of 458,225 metric tons of LPG were imported in 2016-17, 395,064 metric tons in 2017-18, when no incentives were available. Imports fell to 251,685 when import was incentivised and totaled about 288,000 in the recently concluded financial year.