The Ministry of Petroleum has made a major change in the new LPG policy by establishing a linkage of local LPG producers’ price with C&F (Karachi) Saudi Aramco Contract Price plus import incidentals instead of the previous policy of FOB Saudi Aramco Contract Price.
The proposal entails enhancing the local LPG Producers’ price by approximately $100-120 per metric tonnes being the marine freight and other import incidentals which will be collected by the federal government as petroleum levy under petroleum products.
According to the draft, LPG policy available with Pakistan Today, which has been prepared by member OGRA Mansoor Muzaffar Ali, significant changes in the policy would help the country achieve enhanced availability of LPG for the consumers benefiting all stakeholders across the LPG value chain. It also mentioned the availability of LPG for non quota holders as there would be no price differential between landed cost of imported LPG and locally produced LPG, ending pressure for seeking LPG allocation by the non-allocatees. This measure will also generate additional revenue of approximately Rs3.0 billion per annum besides increased sales tax at import and subsequent stages; and would ensure price stability and enhanced LPG availability for the consumers who end up paying a much higher price than the international LPG price, due to shortage. A meeting of Task Force Committee comprising representatives of Planning Division, Ministries of Industries, Water & Power, Finance and FBR was convened to review the LPG (Production & Distribution) Policy, 2006. The primary objective of the meeting was enhancing LPG availability without compromising on the safety and other regulatory standards. The meeting approved the draft LPG Policy (Production and Distribution) Policy, 2011. Subsequently, the Planning Division, Ministry of Finance, Ministry of Industries, Federal Board of Revenue and Oil & Gas Regulatory Authority have been asked to put forward their suggestion during the ECC meeting. The Ministry of Petroleum and Natural Resources has recommended the approval of LPG (Production & Distribution) Policy, 2011 which has been authorised by the Minister for Petroleum and Natural Resources authorising submission of the Summary to the ECC of the Cabinet. In the backdrop of a gap between demand and supply of natural gas which is increasing every day because of its low price vis-à-vis other alternate energy supplies and its convenience to use. Given these circumstances the importance of LPG for meeting energy needs as an alternate fuel has further increased. The Energy Task Force in its meeting a few years earlier, had recommended that LPG producers may be allowed to fix their prices at their own on monthly basis. However, OGRA would monitor producer and consumer prices with the objective that the prices remain at a reasonable level within the parameters of LPG Policy 2006 and that the producer prices should not exceed the Saudi Aramco Contract Price. Further, OGRA will monitor the LPG consumer prices and will submit weekly report to the Government.
The ECC of the Cabinet in its recently concluded meeting ratified the said decision of the Energy Task Force. It has, now, been observed that perceived objectives regarding enhancement in LPG supplies and streamlining distribution at affordable prices could not be achieved. The policy could not incentivise imports which remained at an average of 140 MT per day during last 4 years. The main reason for low import was price differential between imported LPG and local LPG that increased gap between demand and supply, resulting in the non availability of LPG, its black marketing, short measurement and decantation problems.