Oil and Gas Regulatory Authority (OGRA) has fixed LPG price for the domestic cylinder at Rs900 and directed LPG Marketing Companies to comply with the new subsidised price.
LPG is most often used in remote areas of the country as a fuel for lightening, cooking and heating purposes where electricity is not readily available. About 1.5 million households currently use LPG fuel for domestic use.
However, the main user of this fuel is the automobile sector. The market share of the automobiles sector in LPG usage is about 60 per cent, while the domestic consumption now stands at about 40 percent of the entire market.
Official documents available disclosed that following the orders of Lahore High Court, Ministry of petroleum and NaturalResources determined the price of LPG and conveyed it to OGRA. The Ogra has issued a brief order regarding LPG price determination of each domestic cylinder at Rs900. As a result, domestic category of LPG consumers will find Rs30 per kg relief in the price.
Ogra has also fixed producers’ prices (including GST) at Rs 36,808/metric ton, documents revealed.
It is important to note here that Ogra has announced the maximum LPG consumer price including GST at Rs 900/cylinder (Rs76, 500/ Metric ton) for each domestic cylinder. But, it has not made any decision regarding LPG price for commercial usage.
“Detailed speaking order of the Authority, in compliance with the directions of the Honourable Lahore High Court, Lahore, shall be issued shortly,” documents said.
Officials at petroleum ministry said price regulation will safeguard the interest of domestic consumers and may help avoid the consumption of locally produced LPG in the industrial and auto sectors. “LPG price regulation will ultimately affect the profits of LPG marketing companies, sources said.
Interestingly, in 2000, the then government had deregulated the LPG industry, saying that the interests of the consumer need to be prioritised, and it would be better if the price of such a commodity of daily use is driven by market forces of demand and supply rather than notifications issued by the government.
The former prime minister Shaukat Aziz linked its price with international prices –calculated on the basis of Saudi Aramco contract prices – on the demand of a couple of private sector investors, led by Iqbal Z. Ahmed, despite the fact that more than 95 percent production of LPG comes from the domestic sector.
The Council of Common Interests (CCI), in its meeting on February 29, 2016, had approved the proposal of regulating LPG prices. But, the government remained unable to implement a decision of the CCI, an inter-provincial body with representation from all provinces, due to some differences between the ministry of petroleum and Ogra.
Though the ministry sent repeated requests and advised to set the LPG price for domestic and commercial consumers at Rs895 per 11.8kg cylinder, the Oil and Gas Regulatory Authority (Ogra) remained reluctant to take steps for price regulation, fearing it will disturb the balance of market operation. And, both the ministry and regulator failed to find common ground.
Ogra had also asked the ministry to seek approval of the cabinet for amendments to the LPG rules before implementation of the relevant policy. However, the ministry later agreed to seek the cabinet’s nod for regulating the LPG prices aimed at stabilising the market.
LPG consumers across the country for a long time were forced to bear the brunt of a sudden hike in the price of LPG mainly because LP marketing companies were given authority to set the price of gas (LPG) for the consumers. For the past many years, these LPG marketing companies were fixing the price of LPG. However, now Ogra has announced the new price of LPG in the light of a court order and instructed the LPG companies to obey the price.
It is worth mentioning here that Ogra has given an end to the role of LPG Marketing Companies in the determination of LPG price for the consumers. These LPG Marketing Companies while determining the price of LPG were allegedly engaged in earning billion rupees worth profits from LPG consumers. Different prices were charged to the LPG consumers in different areas. However, now Ogra has fixed the unanimous price of LPG cylinder for consumers of the country.
Moreover, under the current policy, if the LPG base stock or fixed LPG price is not considered reasonable or in the event of any cartel formation, the authority may, in the public interest, determine a reasonable price of the LPG base stock or LPG in accordance with the prevailing policy of the federal government, which a licensee will charge from another licensee or consumer.