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February 2, 2021

Deadlock persists on hike in PLL’s LNG margin up to 3.75pc

February 2, 2021

ISLAMABAD: A deadlock continues to persist between OGRA and the state-owned entity Pakistan LNG Limited (PLL) on increasing the LNG margin up to 3.75 percent as the regulator says that the revised margin will cause more increase in the LNG price for consumers in Pakistan. And more importantly, OGRA also contends that it cannot take decisions on such petitions without persuasive justification.

The Pakistan LNG Limited (PLL) is seeking a raise in the LNG margin up to 3.75 percent from the existing 2.5 from June 1, 2018 as was approved by the Economic Coordination Committee (ECC) in May 2018. One of the members of OGRA, when contacted, said: “Yes, PLL wants OGRA to increase the LNG margin up to 3.75 percent, but for the regulator it is not possible to increase it without any proper justification, even if it is approved by ECC.”

He further said that PSO is also getting 2.5 percent LNG margin. “Though PSO also wants to increase it, increasing the LNG margin simply means an increase in LNG price for its consumers.”

The PLL had sent a reminder to OGRA on December 21, 2020 saying: “The current margin of 2.5 percent is significantly lower than the costs borne by PLL, with taxes alone amounting to 1.9 percent out of the total 2.5 percent.” The letter, a copy of which is available with The News, says that in the financial year 2018-19, as a result of LNG's 2.5 percent margin, the PLL posted a loss due to taxes paid at the import stage exceeding the profits generated during the year. The Petroleum Division official says that the FBR first deducts 1pc income tax at import stage and then 0.9 percent at the sale invoice stage but is not ready to adjust it, which is why the maximum of the existing 2.5 percent goes into the pocket of tax collecting machinery and whatever left is just peanuts for PLL. “The FBR is not ready to slash down the taxes, which is why the ECC approved the increase in PLL’s LNG margin up to 3.75 percent.”

Highlighting the financial problems of the PLL, he said its receivables have risen by Rs60 billion because of failure to recover the cost against the RLNG sold out so far. And on top of that, over 60 percent of its LNG margin evaporates because of taxation.

The latest communication with OGRA also says that PLL, along with the Ministry of Energy (Petroleum Division), has provided adequate clarification to all queries regarding the increase in LNG margin.

However, OGRA is yet to implement the ECC decision, which is causing a significant financial loss to PLL. Furthermore, it says, the LNG margin recoverable by PLL from June 2018 till November 2020 amounts to an alarming US$30.13 million (Rs4.82 billion), with no clarification provided by OGRA as to how such amounts will be recovered by PLL. The PLL has also asked OGRA to expedite the implementation of the ECC approved margin from June 01, 2018. And if OGRA has any reservations, a meeting could be held to alleviate the concerns in order to resolve the matter.