Ogra for linking LPG prices with import parity: crucial talks collapse

Though top officials of the Ministry of Petroleum and leading LPG businessmen failed to develop consensus on a new mechanism of LPG prices and product availability at a high level meeting held on Saturday, Oil and Gas Regulatory Authority (Ogra) has proposed to link LPG prices with import parity in a complete deregulated mechanism to ensure smooth supply of the product that would bring down the prices, Business Recorder has learnt.
The proposal of waiving off General Sales Tax (GST) at import stage has also been discouraged, which may result in smooth supply of LPG. Sources say that the group mainly comprising powerful businessmen sought to fix responsibility of 25 percent import on refineries and other LPG producers, which refuse to follow the proposal.
The LPG producers have also supported the proposal to link LPG prices with import parity in a complete deregulated mechanism. They have opposed de-linking of LPG price with Saudi Aramco Contract Price (CP) saying it would not be feasible to market product if the proposal is implemented.
According to LPG Policy 2006, Ogra is to determine the reasonableness of price keeping in view the import parity price of LPG. Sources said that Ogra officials are of the view that LPG prices should either be completely de-regulated or regulated and there was no middle way to operate market forces for availability of products to reduce consumer price.
Ogra officials said the secretary dropped the proposal of Member Gas for imposing Petroleum Levy (PL) on locally produced LPG in a bid to end monopoly of local players. It would have also fetched Rs 4 billion revenue per annum for cash-starved economy.
In response to a letter sent by the Prime Minister Secretariat, Member, Gas, Oil and Gas Regulatory Authority (Ogra), had proposed to impose PL equivalent to marine transportation cost, plus import incidentals ($120/ton) to reduce the difference between the prices of locally produced and imported LPG. The initiative was proposed to ensure smooth supply of LPG in domestic market resulting in breaking monopoly of certain groups and ending the LPG quota system.
Sources said that LPG marketing companies under the umbrella of All Pakistan LPG Association (APLPGA) had strongly opposed imposition of PL on locally produced LPG. "But Ogra officials remained silent spectators over opposition of levying PL and did not present proposal prepared by Member Gas before the meeting chaired by Secretary Petroleum Imtiaz Qazi," sources added.
Talking to Business Recorder, LPG importer Hadi Khan said, "The meeting has been informed that LPG imports are always at risk due to monopoly of local players who suddenly reduce LPG prices when consignments are about to land at Karachi. "Secretary Petroleum accepted that it was in his knowledge that some forces were operative to wipe out the importers in a bid to dominate the market," he said, adding that if there had not been imports in the country, LPG prices should have jumped up to Rs 200 per kg. "I have also proposed to waive off GST at import stage of LPG to provide level playing field for the importers," he said.
"Local players urged to remove cap of Saudi Aramco Contract Price (CP) that was resisted by importers who feared that it would further create monopoly in LPG market," sources added. Importers said that there was a difference of 120 dollars per ton between locally produced and imported LPG making it difficult for them to market imported products. Local players presented data to show difference between local and imported product that was also challenged by importers.