LPG price cut by Rs 10,000 per ton

The public sector producers of Liquefied Petroleum Gas (LPG) have cut LPG price by Rs 10,000 per ton after the imposition of the recently notified Petroleum Development Levy (PLD) amounting to Rs 11,486 per ton. According to a circular issued by Pak-Arab Refinery (Parco) and Oil and Gas Development Company Limited (OGDCL), the ex-refinery LPG prices are fixed at Rs 69,340 per ton.
The base stock Price (exclusive of FED and GST) of both the companies was Rs 79,340 before the new notifications were issued. The notifications issued by Parco and OGDCL stated that the new LPG base prices after imposition of the recently imposed PL of Rs 11, 486 per ton would be Rs 80,826 per ton, which would further increase to Rs 93,800 per ton after imposition of General Sales Tax (GST) at the rate of 16 percent. This shows that production price of the commodity is around Rs 94 per kg. While in the market LPG is available at Rs 160 per kg.
Mohammed Irfan Khokhar Chairman All Pakistan LPG Distributors Association talking to this correspondent termed it a positive move on the part of government. He said that it would compel private sector to reduce price of the commodity in the market. The federal government does not want private sector to pass on the impact of Petroleum Levy to the consumers.
He said that in December, 2011 Pakistani LPG importers have imported 17,388 tons of LPG, which is a record. He added that after implementation of LPG Policy 2011, general Sales Tax (GST) on LPG import would be lifted, which would further bring down LPG price by Rs 14 per kg. He said that PL would be collected from LPG producers and not from the common consumers and it would have no impact on the consumer price as claimed by marketing companies. Irfan added that enforcement of the LPG Policy would help importers to import 25,000 tons per month and consequently its price would come down to Rs 100-110 per kg countrywide.
According to Petroleum Ministry sources, the government has planned to gradually pass on the burden of Petroleum Levy (PL) on LPG to the consumers. On January 17 the Petroleum Ministry imposed a surcharge of Rs 11,486 per ton on all locally-produced LPG. After the imposition of PL, the LPG marketing companies announced to increase price at least by Rs 12 per kg and to deal with the increasing criticism from the marketing companies as well as by consumers the government directed major LPG producers to bring down price by Rs 10,000 per ton. At present, average retail LPG price is about Rs 155 per kg, which would be reduced to Rs 145 per kg.
The LPG marketing companies are of the opinion that producers are expected to pass this additional cost on to the end-consumers. The government of Pakistan is the largest producer of LPG in the country by virtue of its shareholdings in, among others, Parco, OGDCL, and PPL.
An official of the LPG marketing companies, when contacted, said that in fact the public sector producers have not reduced the prices, as the government would still collect Rs 1,486 per ton. He explained that OGDCL and Parco reduced prices by Rs 10,000 per ton, while the government has imposed Rs 11,486 PL on LPG so in reality the base stock price has been increased by Rs 1,486/ton on net basis.
He said that Parco and OGDCL have partially passed on the price impact of PDL. This they have done on verbal instructions from the Federal Minister, who is trying to avoid public and media backlash. However, sources privy to development revealed that Federal Minister intends to gradually pass on to consumer the impact of PDL in the coming months so that the negative impact of price increase could not be highlighted.