KARACHI: LPG prices across Pakistan may increase by at least 16 per cent or by Rs13 per kg as per a latest directive of the Oil and Gas Regulatory Authority (Ogra), stakeholders claim.

The Ogra through a letter on Sept 19 (LPG-17(242)/11) informed Pakistan’s 11 LPG producers that the petroleum development levy (PDL) intended to facilitate imports and financially shore up Progas Pakistan Limited has to be implemented positively from Sept 21, failing which “strict punitive action” shall be taken against noncompliant producers.

According to a spokesman for the LPG Association of Pakistan, Belal Jabbarm, the Ogra notification cites the disputed new LPG Production and Distribution Policy 2011 and states that it has determined the “maximum base-stock price of LPG (FoB Saudi Aramco Contract Price plus marine freight and import incidentals)” at Rs83,973 per metric ton.

Ogra has also determined [PDL] as Rs11,485/MT. Based on the Saudi Aramco Contract Price for September, local LPG producer prices had been averaging at Rs72,400/MT this month.

This forced LPG producer price increase would be passed on to nationwide LPG consumers in the face of Ministry of Petroleum and Natural Resources’ spurious claims that the PDL would make the product cheaper, he added.

On September 17, the ministry issued a press statement rejecting the objections raised by LPG marketing companies and distributors and claimed that the “mere announcement of the new LPG policy by the government” had led to fall in LPG prices
by Rs56 per 11.8kg cylinder.

The ministry also claimed that the ultimate benefit of the new policy would go to LPG consumers. Nationwide consumers of LPG would now benefit from higher prices.

“The ministry’s willingness to violate LPG rules and the law is alarming,” Belal said, adding under the old and new LPG policies, LPG producer prices have to remain fixed for at least 30 days, and Ogra’s notification directing LPG producers to increase their prices violates the policy framework.

“The statements emanating from the Ministry clearly demonstrate that its officials have no idea what they’re talking about,” said Ali Haider, who represents All-Pakistan LPG Distributors Association. “This is regrettable, but hardly surprising,” he added.

Local LPG producer prices have been linked with Saudi Arabian export prices since January 2007. The Saudi Aramco Contract Price, or Saudi CP, was $975 per metric ton during May, $897 in June, $839 in July, $865 in August, and $835 for September. Pakistan’s 11 LPG producers have adjusted their monthly prices accordingly.

Ogra has directed Attock Refinery, Ocean Pakistan, National Refinery, BP, Pakistan Refinery, PPL, Jamshoro Joint Venture, Byco Petroleum, Pakistan Oilfields, Pak-Arab Refinery, and OGDC to increase prices immediately.

Kalbe Ali from Islamabad adds: The government on Tuesday imposed 16 per cent development levy on locally produced LPG and the Ministry of Petroleum and Natural Resources has issued a notification.

The Ogra is expected to announce the new pricing mechanism for the locally produced LPG.

“The new tax will be enforced from today (September 21) and we will make sure that the consumer prices remain stable in the markets,” said an Ogra official.

He said that a policy is expected today (Wednesday) by the regulator to ensure that the LPG producers and the marketing companies do not pass on the 16 per cent levy to the consumers.

The notification by the petroleum ministry has said that the new tax will be collected by the federal government as petroleum levy under Petroleum Products (Development Levy) Ordinance, 1961.

While talking to Dawn, the Federal Minister for Petroleum and Natural Resources Dr Asim Hussain said that that the levy has been imposed to bring parity between the cost of locally produced LPG and the imported one.

“This will reduce windfall profits enjoyed by the local LPG producers and encourage imports as margins have been lowered,” Dr Asim Hussain said, adding, “Pakistan needs higher imports to cater the rising LPG needs.”

He said that the 16 per cent levy would ensure price stability and enhance LPG availability for consumers, who have to pay higher prices than the international LPG rates due to shortages mainly during winters.

The minister also said that higher imports are needed to ensure that LPG is available in far-flung areas of the country.