Rising LPG prices push Karachi tea cafes back to coal

Rising Liquefied Petroleum Gas (LPG) prices are prompting tea cafes across Karachi to switch back to coal, as businesses grapple with soaring fuel costs and intense competition that limits their ability to raise prices.

A Business Recorder survey found that dozens of tea cafes across Karachi, including in Gulistan-e-Johar, North Karachi, and Federal B Area, have switched to coal as a cheaper alternative to increasingly expensive LPG.

Abdul Raheem, a cafe owner in Gulshan-e-Iqbal, said the continued rise in LPG prices “has made it difficult to sustain the business”, prompting them to switch to coal as a cheaper alternative fuel.

LPG prices in Pakistan have risen sharply in recent months, with the Iran-US conflict adding further pressure to an already volatile market. Disruptions to energy supplies and shipping through the Strait of Hormuz have pushed up regional energy costs, feeding into Pakistan’s LPG market and raising operating expenses for small businesses that rely heavily on the fuel.

The Oil and Gas Regulatory Authority (OGRA) increased the price of liquefied petroleum gas (LPG) for August 2026 by Rs12.89 per kilogram, raising the price of an 11.8kg domestic cylinder by Rs152.01 with effect from August 1. The consumer price of LPG was fixed at Rs254,315.35 per tonne, or Rs3,000.92 for 11.8kg domestic cylinder for August, compared with Rs241,432.84 per tonne and Rs2,848.91 per cylinder in July.

Raheem said apart from being more affordable, customers have also responded positively to the taste of the tea prepared using coal. “Some years ago, there was strong demand for tea prepared using coal, but now it has become a necessity as LPG prices have risen sharply.”

He said a 40-kilogram LPG cylinder costs Rs14,000 and lasts around five days. “In comparison, an equivalent quantity of coal costs about Rs5,000, translating into monthly savings of around Rs54,000 in fuel costs”.

“LPG prices are highly volatile, while its availability also remains a concern.”

Rahmatullah, another tea cafe owner in the Buffer Zone area, said intense competition has made it difficult for businesses to raise prices. “Therefore, reducing costs is the only way to improve profitability, and switching to coal helps us achieve that,” he said.

He further said that LPG prices have fluctuated more sharply in recent months than those of any other raw material.

Energy expert Usama Khan said fuel costs, a key variable input for tandoors, dhabas and small bakeries, are rising faster than menu prices, leaving small food businesses with little room to absorb the shock.

With no hedging capacity and limited working capital, many operators are coping by accepting lower profit margins, reducing portion sizes and, in some cases, quietly cutting staff, he added.

Apart from the price hike, industry stakeholders attribute the shift to coal to other factors as well, including limited availability of LPG filling stations across the city.

LPG Distributors Association Chairman Irfan Khokhar told Business Recorder the increase in LPG prices is not solely due to the US-Iran conflict. “Black marketing, lack of proper LPG filling stations, and the flawed LPG pricing formula introduced in 2018 are also major reasons behind the jump”.

He urged the government to revise the LPG pricing formula, claiming LPG is being sold in the black market at various rates.

Giving his views on the pricing formula, Usama Khan said the LPG pricing formula is linked to the Saudi Aramco Contract Price.

“Pakistan remains highly vulnerable to external energy shocks, with more than 40% of its primary energy needs met through imports,” he said, adding every $10 increase in global oil prices widens the country’s current account deficit by an estimated $1.5-2 billion and pushes inflation up by 0.5-0.6 percentage points.

To reduce the vulnerability, the energy expert called for lowering the economy’s import dependence by accelerating the substitution of imported coal with Thar lignite, a move he claimed could save around $2 billion annually.