- OGRA ends marketing companies’ rule
- Relief for domestic consumers as LPG price fixed at Rs900 per cylinder across the country
Good news for domestic LPG consumers of the country as the Oil and Gas Regulatory Authority (OGRA) has fixed LPG price for each domestic cylinder at Rs900 and directed LPG marketing companies to comply with the price.
LPG is most often used in remote areas of the country as a fuel or for lighting, cooking and heating purposes where electricity is not available. More than 1.5 million households are using LPG fuel for cooking and heating purposes. Market share for automobiles in LPG business is about 60 percent while domestic consumption stands at about 40 percent.
Official documents available with this correspondent disclose that following the orders of Lahore High Court, Ministry of Petroleum and Natural Resources determined the price of LPG and conveyed it to OGRA, which then issued a brief order. As a result, domestic category of LPG consumers will find a relief of Rs30 per kilogram in the price as OGRA has reduced the price of each domestic cylinder by Rs300. OGRA has also fixed producers’ prices (including GST) at Rs36,808/MT, documents say.
It is to note here that OGRA has announced the maximum price for LPG for domestic consumers for each cylinder but it has not made any decision for a commercial cylinder.
“Detailed order of the Authority, in compliance of the directions of the Honourable Lahore High Court, Lahore, shall be issued shortly,” documents say.
Officials at petroleum ministry said price regulation will safeguard the interest of domestic consumers and may help avoid the consumption of locally produced LPG in the industrial and auto sectors. “LPG price regulation will ultimately affect the profits of LPG marketing companies,” industry analysts say.
Interestingly, in 2000, the then government had deregulated the LPG industry, saying that the interest of the consumer has to be given foremost priority, and it would be better if the price of such a commodity of daily use is driven by market forces of demand and supply rather than notification by the government.
Later, the former Prime Minister Shaukat Aziz linked LPG prices with international prices –calculated on the basis of Saudi Aramco contract prices – on the demand of a couple of private sector investors, led by Iqbal Z Ahmed, although more than 95 percent production of LPG comes from the domestic sector.
The Council of Common Interests (CCI), in its meeting on February 29, 2016, had approved the proposal of regulating LPG prices. But, the government remained unable to implement the decision of the CCI, an inter-provincial body with representation from all provinces, due to some differences between the Ministry of Petroleum and OGRA.
Though the ministry sent repeated requests and advised to set the LPG price for domestic and commercial consumers at Rs895 per 11.8kg cylinder, OGRA remained reluctant to take steps for price regulation, fearing it will disturb the balance in the market. Both the ministry and regulator failed to find common ground.
OGRA had also asked the ministry to seek approval of the cabinet for amendments to the LPG rules before implementation of the relevant policy. However, the ministry later agreed to seek the cabinet’s nod for regulating the LPG prices aimed at stabilising the market.
Consumers across the country were forced to bear the brunt of sudden hike in the price of LPG, mainly because LPG marketing companies were given authority to set the price for the consumers. However, OGRA has now announced a new price of LPG in the light of a court order and instructed the LPG companies to follow the price.
OGRA has ended the role of LPG marketing companies in determining the price of LPG for consumers, as these LPG marketing companies were allegedly engaged in minting billions of rupees in profits from consumers. Different prices were set for consumers in different areas. However, OGRA has fixed a unanimous price for consumers across the country.
Moreover, under the current policy, if the LPG base stock or fixed price is not considered reasonable or in the event of any cartel formation, the authority may, in the public interest, determine a reasonable price in accordance with the prevailing policy of the federal government, which a licensee will charge from another licensee or consumer.
