The Economics Co-ordination Committee (ECC) of the cabinet approved the imposition of Petroleum Development Levy (PDL) on locally produced LPG as recommended by the Ministry of Petroleum & Natural Resources. The levy, which seeks to increase the price of locally produced LPG by some $150 per ton to equate it with import prices will directly impact consumer prices and increase it by 15 percent.
"Neither the LPG producers nor the LPG marketing companies were consulted regarding imposition of PDL," said Belal Jabbar, a spokesman for the LPG Association of Pakistan. he said the Association had requested for a meeting with the Ministry of Petroleum on July 28 to discuss the issue of PDL and had informed it of vital issues that needed to be resolved urgently. However, no time for a meeting was given, he added. "It is obvious that that the government was least interested in taking the opinion of the stakeholders," said Belal.
"Many companies have paid steep premiums to state owned producers for purchasing allocations of LPG. It will become increasingly difficult for the producers to justify the acceptance of the premiums which will have to be returned if subsequent legal challenges are to be avoided," he added.
"80 percent of the country's LPG is locally produced at a cost far below its international price. To facilitate a mere 20 percent imports the government is seeking to increase the price for all locally produced LPG. The levy obviously seeks to benefit SSGC which is in the process of acquiring a LPG import terminal from a bankrupt company in Karachi," he added.
Despite a drop in local production, demand for LPG has remained stagnant. LPG account for a mere 0.6 percent of the country's energy mix has seen a severe erosion in its demand due to all time high Saudi Aramco Contract prices with which local producer prices are already linked. Imports too have witnessed a sharp decline this year owing to high international prices.
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