The Economic Co-ordination Committee (ECC) of the cabinet has directed the Petroleum Ministry to pursue the cases filed by the Liquefied Petroleum Gas (LPG) companies in superior courts so that decisive action could be taken to break the monopoly of a few companies, official sources told Business Recorder.
On May 19, 2009, the ECC had requested proposals from the Petroleum Ministry to fragment LPG cartel, which is earning unreasonable profits across the country.
However when the concerned Ministry was asked on October 27 to give reasons for the delay in bringing anti-monopoly proposals before the ECC, the officials present in the meeting stated that there were legal problems in finalising proposals to break up monopoly of a few companies marketing LPG.
After a brief discussion on the issue, the ECC directed the Petroleum Ministry to provide copies of petitions filed in the Supreme Court and the Lahore High Court (LHC) to Minister for Parliamentary Affairs Senator Babar Awan, who has recently been made a member of the ECC on the instruction of Prime Minister Yousuf Raza Gilani.
"ECC decided that the cases in the superior courts be pursued proactively," the sources maintained. At present, there are 72 LPG marketing companies in Pakistan. The country's local production is 1,600 tons per day and after setting up of LPG stations demand is expected to double in the coming years. The LPG industry is expecting around 500 LPG stations during the next three years and these stations would require 0.4-0.5 million tons of LPG per year.
The rationale behind restricting Ogra from issuing new licences is reportedly the cartelisation of some of the companies. Keeping in view the shortage of natural gas, the government has already imposed a ban on issuance of new licences for CNG stations in the country.
"Restricting competition is not something that can easily be defended. There are 72 marketing companies and eight more are coming up according to Ogra. People wishing to enter the market should be allowed to do so like in the past based on their own risk assessment," said one of the stakeholders.
According to the proposal, Ogra will no longer be allowed to issue licences to any party for the setting up of new LPG marketing companies unless the applicant produces a five-year contract with a LPG producer or supplier.
The Planning Commission is of the view that LPG Production and Distribution Policy 2006 is investor-friendly and fosters healthy competition principles, while opposing imposition of restrictions for licences will discourage market forces to operate.
It is pertinent to mention that the Deregulation Order, 2000, states that the "Government would stop making allocation of LPG with immediate effect" and that "all the new producers of LPG, who are the real investors in the LPG plants, have been given the right to either market their product by themselves or dispose of their LPG to the licensed marketing companies or to the new parties after their pre-qualification in accordance with the LPG Rules."