ISLAMABAD: The Ministry of Planning, Development, and Special Initiatives has recommended the government to continue the overall structure of the regulatory regime for some time keeping in view the current LPG dynamics, although a deregulated competitive market is the ultimate policy objective.
This has been stated in the Ministry of Planning, Development, and Special Initiatives' "Report on Sustainable LPG Supply Chain". A committee headed by the deputy chairman Planning Commission had submitted recommendations for consideration of federal government on the LPG policy.
The Cabinet Committee on Energy (CCoE) formed the committee on June 20, 2020. The committee comprised the Finance Division, Petroleum Division, chairperson Oil and Gas Regulatory Authority (OGRA), managing director Sui Southern Gas Company Ltd (SSGCL), managing director Pakistan State Oil (PSO), and managing director PARCO.
Under the proposal, domestic producer price will be determined through fixed at Saudi CP Price competitive monthly/quarterly bidding/auction without any ceiling price. Producers will also define non-discriminatory technical pre-qualification criteria for short-listing the eligible firms for the bidding/auction process.
The committee also recommended the market to be gradually moved to a deregulated and competitive regime. At present, the Ogra fixes LPG prices. It is also recommended to support the development of indigenous LPG to boost local production and additional storage.
The committee has proposed fiscal incentives such as zero-rated import of machinery and equipment, and tax holidays to encourage maximum investment. A demand review committee to assess the demand-supply situation, determine indicative import requirements, and publish on the market situation should be formed.
The Petroleum Division will formulate ToRs in consultation with the OGRA, reporting requirements, and the review committee's rules. Signature Bonus in the existing contracts within six months, while moving to competitive bidding. The PDL is fixed based on a fixed PDL of Rs9,500/MT.
The committee has proposed to fix it with a similar GST. Remove advance income tax on import of LPG has been recommended. Similarly, advance income tax/WHT treatment on both imported and local LPG. The committee has recommended uniform GST application on the sale of both imported and local LPG. 10 percent GST to reduce LPG's price. A fixed PDL of Rs9500/MT is proposed.
The committee has proposed direct subsidies for target areas through cash transfers like the Ehsaas Programme. A similar method for providing LPG to Balochistan or other such targeted areas includes merged FATA areas, the AJK, the Gilgit-Baltistan, etc. It proposed to impose/continue the moratorium on the use of LPG in transport.
It further proposed to continue the ban on refueling of 3-wheelers and public-sector vehicles. It is also recommended to discourage new development of LPG Air-Mix plants at government expense. However, the government may encourage privately-owned/operated LPG Air-Mix plants.
The Ogra will study and devise different pricing zones (ceiling prices) for LPG sales in the country within six months and present the feasibility of the same to come in six months. The Ogra may allow petrol pumps to be used as selling points for LPG cylinders, subject to safety consideration and other codal formalities.
The share of each energy commodity in primary energy supplies for 2018-19 comprised of oil 25.7 (percent): natural gas (35.0 percent), LNG import (10.6 percent), LPG (10.1 percent), coal (15.4 percent), and electricity (12.1 percent).
Copyright Business Recorder, 2020