As the government re-enters, the highly lucrative Liquefied Petroleum Gas (LPG) business, Pakistan’s annual demand for LPG is expected to jump to 10,000 tonnes from the current level of 430,000 tonnes per annum. An official source said that the new LPG Production and Distribution Policy 2011, already approved by the Economic Coordination Committee of the cabinet is expected to be announced shortly.
Currently, 1200 tonnes per day LPG is produced domestically while the demand is of 1600 tonnes per day. At present level LPG is contributing 1 per cent to the total energy mix.
The shortage increases to 800 tonnes per day in the six month winter season. “The demand is set to show a massive boost in next few months as the re-entry of public sector entities would improve its availability in the country”. The government has been under constant political pressure to end the monopoly of a few private sector entities that were controlling the supply of LPG all across the country and were alleged to be involved in price fixing and cartelization. The new policy imposes a levy of Rs 11 per kg on the domestically produced LPG to bring its prices at par with the international ones.
Chairman of LPG Distributors Association of Pakistan (LPGDAP) Irfan Khokhar claims that the LPG cartel had fleeced the people of Rs 350 billion during the last decade after the sector was deregulated by General (R) Musharraf’s regime in 2001.
LPG was priced at Rs 12,900 per ton in 2001 which has increased to Rs 84,000 tonnes in 2011. He supports the new policy observing that it would promote competition in the sector that would help end the cartelization and monopoly of 25 marketing companies owned by highly influential people. However, he adds that the success of the policy would be dependent on the enforcement of the Oil and Gas Regulatory Authority (OGRA), which he claims is infested with black sheep. He says the new policy imposes the condition that the 25 marketing companies having quota would have to import 20 per cent of their quota and upon failure their licenses and quota could be cancelled.
“OGRA has so far failed to implement its directive of June 22 that bound the LPG companies to issue receipts whether the supplied LPG was domestically produced or imported.”The companies sell their locally produced LPG on imported prices, even though only 6 companies imported some LPG every month, he said adding that it was the failure of the enforcement wing of OGRA that was resulting in windfall profits for LPG companies.
The Competition Commission of Pakistan had imposed heavy penalties on LPG companies for their involvement in cartelization but its decision was challenged in the court. OGRA had directed 11 LPG producers to raise their prices by 16 per cent with effect from September 21 under the petroleum development levy (PDL) provision of the new LPG Policy 2011.
But later on the Petroleum Ministry reversed the decision and asked public sector LPG producers to absorb the PDL instead of passing it on to the consumers.
State-owned PARCO announced a PDL-based addition of Rs 11,485 per tonne to its LPG price on Wednesday morning only to withdraw it hours later.
Similarly, the state controlled
OGDCL and PPL decided not to increase their prices.