LPG prices are expected to increase by at least Rs9 per kilogram from next month as a result of a sharp increase in Saudi Aramco Contract Price. Saudi Aramco Contract Price with which local LPG prices are indexed stood at $850 per tonne for propane and $910 for butane in January. However due to tensions in the Middle East and Persian Gulf and rising oil prices, the spot prices for both Propane and Butane have increased to alarming levels of $940 and $990 per
tonne respectively. The applicable price in Pakistan is calculated on a 40:60 ratio between propane and butane. “The Saudi Aramco CP due to be announced on the 30th of this month will be the highest ever” said Belal Jabbar the spokesman for LPG Association of Pakistan.
Resultant increase in prices will translate into an increase of Rs106 for domestic and Rs408 for commercial cylinder. LPG retail prices could jump as high as Rs155 per kilo whereas the sale price for domestic and commercial cylinders will increase from Rs1,650 to Rs1,756 and Rs6,350 to Rs6,758. “We urge the government to seriously reconsider the imposition of the Petroleum Levy on LPG which will only make the situation worse for the consumers” said Belal. On 16th January 2011 federal government imposed a Petroleum Levy of Rs11,486 per tonne on LPG production in order to increase its price and equate it with that of imports.
However, in order to avoid criticism and public backlash state owned LPG producers upon direction from the ministry reduced their prices by Rs10,000 per tonne before adding
the levy of Rs11,486. The resultant increase in prices was therefore Rs1,486 per tonne.
It is feared that the impact of the levy will not be absorbed by producers next month and will instead be borne by the consumers since the stated objective of the ministry of petroleum has been to increase the local prices. The country imported a record amount of 17,000 tonnes of LPG in December. However, with the imposition of the levy, imports have fallen to 11,000 tonnes in January said Belal.
