Ministry circumvents court orders, imposes LPG surcharge

Federal government has imposed a Petroleum Development Levy on locally-produced LPG with effect from Monday, according to an official notification. The new tax is expected to raise retail prices by at least 10 per cent immediately; and is likely to be challenged in court. “The government’s decision to forcibly raise LPG prices, which are already equated with Saudi Arabian export prices, is a deeply flawed one,” said Belal Jabbar, spokesman for LPG Association of Pakistan (LPGAP). “This will have an urgently adverse effect on everyday consumers and the industry,” he added. “We are disappointed that the government has chosen to disregard both the public interest as well as the orders of the honorable courts.” Petroleum Development Levy on local LPG production was first imposed last September through LPG Policy 2011. That policy, which was made without stakeholder inputs and aimed at crowding out the private sector and establishing a public sector monopoly, was suspended in its entirety by the honourable Lahore High Court. LPG industry maintains that the policy was crafted to secure financial viability of Progas LPG import facility, which was controversially purchased last year by Sui Southern Gas Company Limited. Ministry of Petroleum and Natural Resources has circumvented the court’s orders and the suspension of LPG Policy 2011 through an amendment to the petroleum products (Petroleum Levy) Ordinance, 1961. It has imposed a surcharge of Rs11,486 per tonne on all locally-produced LPG with effect from January 16. The government-dictated price increase is expected to take retail prices to about Rs155 per kg from the current average of Rs140 per kg. “With the imposition of the surcharge, LPG prices in Pakistan are now at an all-time high,” said Jabbar. “This is unprecedented and gives the lie to the government’s own claims of desiring to facilitate lower-income households which rely on LPG for heating and cooking purposes.” Pakistan’s 11 LPG producers are expected to pass this additional cost on to end-consumers. The government of Pakistan is the largest producer of LPG in the country by virtue of its shareholdings in, among others, PARCO, OGDCL, and PPL. Pakistan is currently facing a natural gas deficit of over 1,000mmscfd. The energy crisis has led to unemployment and unrest across the country. After imposition of Petroleum Development Levy, LPG, which was being used as a replacement fuel for natural gas, has now become the most expensive fuel in Pakistan in terms of calorific value per rupee.