Effective from February 3, the prices liquefied petroleum gas (LPG) have been increased by around Rs 15 per kg, ie for domestic cylinder (of 11.8 kg) by Rs 170, and commercial cylinder by Rs 681. According to LPG marketing companies, for February, Saudi Aramco Contract Price (CP) for LPG has soared to a record high of $1028 per ton, which is $142 per ton higher as compared to LPG prices in January.
The resultant increase in prices will translate into an increase of Rs 170 for domestic and Rs 681 for commercial cylinder. LPG retail prices could jump as high as Rs. 155-160 per kg whereas the sale price for domestic and commercial cylinders will increase from Rs 1650 to Rs 1830 and from Rs6356 to Rs 7035 respectively.
Belal Jabbar, spokesman for LPG Association of Pakistan, said that local LPG producer prices' are linked to the Saudi Aramco CP and are calculated on 40:60 ratio of propane to butane are expected to increase by at least Rs 15,000 per ton to settle at Rs 107,000 per ton with effect from February 3, 2012.
"We urge the government to seriously reconsider the imposition of the petroleum levy on local LPG, which could further escalate prices by Rs 28,000 per ton instead of Rs. 15,000" Belal said. "The imposition of the levy is unjustifiable and is pure discrimination against local production" he said. It should be noted here that LPG marketing companies are blaming Ministry of Petroleum for unprecedented increase in commodity prices, while the Ministry officials, including Federal Minister for Petroleum, are arguing that LPG marketing companies have created a cartel and are increasing LPG prices on their own.
As per law, the Oil and Gas Regulatory Authority (Ogra) is responsible for regulating and fixing the prices of gas and petroleum products, but in case of LPG the authority has never taken any serious step. According to LPG Distributors' Association Chairman Irfan Khokhar, the LPG burgeoned to 1072 dollars per ton after its price surged by $142 per ton in international market, adding that after this international phenomenon, the LPG producers raised gas price to Rs13,965 per ton in Pakistan.
He said that world tariffs would not be implemented in Pakistan. He said that LPG distributers have called a meeting on February 15 to hammer out a strategy against LPG price raise, saying that under the present conditions doing LPG business is not feasible.
On January 16, 2012 the government imposed petroleum levy (PL) of Rs 11,486 per ton on local LPG production to increase its price and equate it with that of imports. However, to avoid criticism and public backlash, state-owned LPG producers, on direction from the Ministry, reduced the prices by Rs 10,000 per ton before adding the levy of Rs 11,486. The resultant increase in prices was therefore Rs 1486 per ton.
"LPG imports have plunged since the imposition of the levy as local prices have risen to alarming levels", said Belal. Imports for December 2011 stood at 17000 tons whereas those in January were less than 12,000 tons". According to Ministry officials, over 60 percent of local LPG production is controlled by the Government of Pakistan through its holdings in Pakistan Petroleum Limited (PPL), the Oil and Gas Development Company (OGDC) and Pak Arab Refinery (Parco). Furthermore 80 percent of the country's requirements are met through local production.