ISLAMABAD: Oil and Gas Regulatory Authority (OGRA) conducted hearings of parties including Pakistan Petroleum Limited and Gold Gas, in order to assess the reasonability of Liquefied Petroleum Gas (LPG) prices.
OGRA held the hearings while keeping in view advices of Ministry of Petroleum and Natural Resources from time to time according to its legal framework.
According to sources, the hearings took place in compliance of the order dated 27-01-2017 of Lahore High Court Lahore in W.P 113/2017 wherein OGRA was directed to decide the matter of LPG pricing.
OGRA sought audited accounts for last three years from the LPG producing companies.
Ministry of Petroleum and Natural Resources on February 9, 2017 and February 10, 2017 proposed LPG prices and advised OGRA to proceed further with the objective to safeguard the interest of domestic consumers.
In the above referred letters maximum LPG consumer price has been proposed at Rs. 93,500 (Rs. 1100/11.8Kg cylinder) including the base stock price at Rs. 59,190 M.Ton, GST 17% and the balance as Marketing and Distribution Margin at Rs. 20,724 per metric ton.
OGRA further advised LPG producing companies to submit the detail of revenues and cost in respect of their LPG business segment.
The companies however submitted that no specific requisite data is available since LPG is a by-product of crude oil extracted during the refining process; no fractional and separate accounts are maintained in this regard.
Resultantly, no adequate data is available to extract the meaningful information to ascertain the cost of LPG base stock.
In this scenario, CP Price (Saudi Aramco) and LPG base stock price quoted by LPG companies is the only available data to determine the reasonability of LPG price.
After extensive deliberation, OGRA observed that LPG consumer price is an aggregate of indigenous base stock price or imported C&F price, LPG marketing and distribution companies' margin and applicable government taxes and levies.
There is no specific parameter or reliable data, in terms of consistency and uniformity, to determine an accurate LPG price.
This very fact has also been enshrined by Lahore High Court, Lahore in Petition No. 613 of 2012.
Further, a uniform price applicable across the country cannot be determined owing to inherited limitations i.e; different freight from the source to consumer destination, base cost from different sources etc.
However, a maximum LPG indicative price can be determined to set a ceiling in order to comply with the legal provisions and honorable court orders in the instant matter.
It has been observed that Ministry of Petroleum and Natural Resources proposed latest LPG producer price at Rs. 59,190 per metric ton, however at the same time the price as quoted by LPG producer stands at Rs. 54,000 per metric ton.
This deviation in LPG producer price required further analysis to arrive at a reasonable limit.
In view of above, historical data with respect to quantity of LPG (local & import), LPG base stock price quoted by local producers, CP price quoted by Saudi Aramco, has been considered and analysis based on the data for past twelve months (February, 2016 to January, 2017) reveals that LPG local producer price is relatively observing market dynamics and CP price by Saudi Aramco.
The LPG local producer price as such does not have its own set of parameters to compute the same, as submitted by LPG producers.
Therefore, at this point in time, average of last three months CP by Saudi Aramco which works out to Rs. 45,276 per metric ton may be considered relevant data for the determination of February 2017 LPG price.
Ministry of Petroleum and Natural Resources was of the view that this margin is relevant to market conditions.
On the basis of above, the latest margin conveyed at Rs 20,724 per metric ton, by Ministry of Petroleum and Natural Resources is adopted for the purposes of LPG price for the month of February, 2017.
In the above backdrop and deliberations, LPG price reasonability for the month of February, 2017 has been computed.
It is clear from the above that imported LPG is totally deregulated activity and shall be supplied to industrial and auto sector as per the LPG Policy, 2016, while LPG locally produced is subject matter of regulation being a poor man's fuel.
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