Task force changes LPG pricing formula

The task force on energy on Tuesday amended the contract price (CP) based liquefied petroleum gas (LPG) formula, barring the Oil and Gas Regulatory Authority (Ogra) from fixing prices on monthly basis for the producers and end consumers.
The task force directed the Ministry of Petroleum (MoP) to go back to the Economic Coordination Committee (ECC) for endorsement of the amendments in the LPG pricing formula.
The amended formula will allow the producers to revise LPG prices at much as they can afford, depending on demand/supply of the gas to the open market. However, they will have to observe contract price of Saudi Arabia as benchmark for higher limit of the prices.
The task force noted that CP-based formula will remain intact for upper limit, but it will not bar any producer to cut down LPG prices for the open market whenever desired. It also observed the changes in the pricing formula will benefit the consumes, who will get LPG at lower rates.
The task force also observed that the hard and fast condition for the producers to sell LPG at CP price of Saudi Arabia was a big hurdle in selling the gas in the local market at subsidised rates. The task force was informed that linking of LPG prices with CP prices was forcing the producers to slow down production.
The task force had taken up LPG pricing issue last week and asked the stakeholders to come again with their suggestions/comments to help it reach to some conclusion on the CP pricing issue.
Sources said the stakeholders came for Tuesday's meeting and they contributed in the form of suggestions/comments to make the amended formula acceptable to every one in the hall. The official side claimed that the amendments in the pricing formula were made after creating consensus among all the parties.
On the recommendations of MoP, the ECC had approved linking of LPG prices with CP prices of Aramco, Saudi Arabia. The CP based pricing formula empowered Ograa to review LPG prices on the third of each month and revise the prices for the end consumers.
The Ministry had overruled the stakeholders while recommending the formula to ECC, but it was bound to backfire. It created a crisis-like situation for the LPG sector. It put the producers, especially the public sector companies, in a difficult position. They could not sell the product at less than the fixed prices.
Since LPG prices go down considerably in the summer, CP-based had formula left the producers with no other option but to cut down production. It also divided the local producers and importers on the pricing issue.
The task force took note of lowering production of LPG during the last few months and asked the producers to refrain from this practice. It asked the producers to keep their production at the highest level and push up supply to the market.