Ogra defies ministry orders; sets LPG price at Rs910/cylinder

Defying  petroleum ministry recommended prices of Rs1,100 per 11.8kg LPG cylinder, the Oil and Gas Regulatory Authority (Ogra) on Friday set LPG price at Rs910 per cylinder for the month of February, it has been reported. The price is starkly lower than the price proposed by the Ministry of Petroleum and Natural Resoucres.

Earlier this month, the ministry, in two separate letters, proposed the LPG price and asked Ogra – the regulator – to safeguard the interest of consumers. It estimated the maximum consumer price at Rs93,500 per ton, or Rs1,100 per 11.8kg cylinder, including the base stock price at Rs59,190, general sales tax at 17% and marketing and distribution margins at Rs20,724.

In a statement issued by Ogra, in compliance with the January 27, 2017 order of the Lahore High Court, it conducted hearings and sought audited accounts for the past three years of LPG producing companies keeping in view the petroleum ministry’s advice and the legal framework.Ogra also asked the companies to submit details of revenues and costs in respect of their LPG business.

However, the companies maintained  that no specific requisite data is available since LPG is a by-product of crude oil extracted during the refining process; no fractional/separate accounts are maintained in this regard.

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In such a  scenario, the Saudi Aramco contract price for imports and the LPG base stock price quoted by local companies were the only available data.

Ogra noted that the LPG consumer price was an aggregate of domestically produced base stock price or imported cost-and-freight price, margins of marketing and distribution companies as well as government taxes and levies.

Furthermore, a uniform price applicable across the country could not be determined because of limitations like different freight from the source to consumer destination, base cost for different sources, etc.

The only possible alternative was to set a  maximum indicative price in compliance with legal provisions and court’s orders.

Ogra noted that local LPG producers had no set of parameters to compute the price. Therefore, the average of past three-month Saudi Aramco contract price, which came in at Rs45,276 per ton, may be considered relevant for determining the LPG price for February 2017.It included margins of Rs20,724 per ton suggested by the petroleum ministry in the LPG price.

The imported LPG market is essentially deregulated and it will be supplied to industrial and auto sectors according to the LPG Policy 2016, while locally produced LPG sales are regulated because of it being a poor man’s fuel.

Reacting to Ogra’s move, LPG Distributors Association Chairman Irfan Khokhar rejected the new price, describing it as an act that would destroy the industry. He maintained that a loss of as much as  Rs3 billion would result as a result of intervention in LPG prices and declared that the association will protest against Ogra’s decision.

 

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