ISLAMABAD: The Pakistan Petroleum Exploration and Production Companies Association (PEPCA) has asked the federal government to end the discriminatory pricing regime that is affecting the local LPG producers.
In a letter sent to the secretary Petroleum Division, the association said that local LPG producers were paying 17 percent GST, whereas, the LPG importers were paying 10 percent GST.
Local producers were also paying a petroleum levy of Rs4,669 per metric tonne, whereas the government had scrapped regulatory duty on LPG imports.
Despite disparity in taxes, the LPG importers were selling at the same price of locally produced LPG, despite enjoying several incentives.
The Competition Commission of Pakistan (CCP) reportedly conducted a study which also pointed out discriminatory pricing regime for locally-produced and imported LPG.
It urged in the study that the government should intervene to end discriminatory pricing regime that was exploiting consumers and may lead to halt future investment.
The letter was written as setting aside the concerns of the local LPG industry, energy experts are working on a proposal of waiving off tax to LPG importers who are already enjoying windfall gains due to tax incentives.
Officials and industry sources say that concerns of the PEPCA and the LPG marketing companies have not been addressed in new proposed policy that has been tilted towards the LPG importers. The proposed new LPG policy will give benefit to the LPG importers and one LPG terminal.
They say that the government had held consultation but the points agreed were not included in the draft policy which was a deviation from the consultation process.
The LPG importers have already been enjoying lower tax.
All countries protect their local industry. However, in Pakistan, the case is reverse as the government protects the LPG importers at the cost of local LPG producers who have called for ending discriminatory pricing regime, a local LPG producer said on the condition of anonymity.
The PTI government energy managers are also set to follow the footprints of the PML-N in case of LPG as they are set to extend more waivers in taxes to big LPG importers.
The sub-committee on LPG has submitted a plan of new LPG policy to the Cabinet Committee on Energy which proposes to penalise the small LPG importers including local producers and allegedly favouring LPG importers and private LPG terminal operators.
The LPG importers have already got benefit of Rs15 billion during the last two years due to lower rate of the GST on LPG import.
Now, a sub-body has recommended imposing regulatory duty (RD) on import of LPG through land route through Taftan in Balochistan.
This imposition of duty will discourage imports through land route and shift all LPG imports through sea route which are exempted from regulatory duty.
Officials said that it would not only benefit mighty LPG importers but one private LPG terminal operator would also mint money due to exemption of regulatory duty on the LPG imports through sea.
The government is already charging petroleum levy on locally-produced LPG which gives favour to LPG importers who pay 10 percent GST, whereas, local LPG producers were paying 17 percent GST.
So, seven percent tax benefit is being given to LPG importers which amounts to around Rs15 billion during the last two and a half years, local LPG producers say.
They said that the government should have subsidised LPG for the poor man through collection of Rs15 billion that had gone into the pockets of the LPG importers.
The government could have provided LPG free of cost to one million households for a year through this money under Ehsaas Programme with this Rs15 billion.
Industry officials said that the government should remove the disparity in GST taxes by charging 17 percent against 10 percent on imported LPG as well.
The government should subsidise LPG out of this collection as seven percent was going into pockets of LPG importers.
At present, the LPG importers are paying 5.5 percent withholding tax on import. The committee has recommended reducing it to zero on LPG import.
There is already disparity on taxes between locally-produced LPG and imported LPG. The committee had proposed removal of withholding tax on LPG which would create more distortion to favour the big LPG importers.
Local LPG stakeholders said that domestic producer price should continue to be fixed at Saudi CP Price for six months during which a transparent mechanism should be worked out to determine the price through a competitive bidding.
They said that the committee had deviated from the points agreed during discussion in draft LPG policy.
They say that the government should give a level-playing field to all the LPG players.
They were of the view that the local LPG producers were already paying Petroleum Levy and the government should charge regulatory duty on all LPG imports from sea route as well.
Copyright Business Recorder, 2021
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