LPG prices are expected to increase by Rs 14 per kilo from 1st January after the imposition of the newly legislated petroleum levy on local LPG production, said Belal Jabbar the spokesman for the LPG Association of Pakistan. As recent as two days ago the Federal Minster for Petroleum Dr Asim Hussain had stated the Government's intent to exempt LPG from sales tax in order to reduce its price and bring it nearer to that of CNG.
However, the notification of the Petroleum Levy issued on 15th December belies that claim. The Petroleum Products (Petroleum levy) (Amendment) Act 2011 was passed by the National Assembly on 25th November and received the assent of the President on 13th December. Through the Act amendments have been made in the 5th Schedule to impose a levy on LPG amounting to Rs 11,486 per ton.
The levy which will add 16 percent to the price being charged by LPG producers will ultimately be borne by the consumers, said Belal. LPG prices are expected to increase by Rs 150 and Rs 600 for domestic and commercial cylinders, respectively. Retail prices could climb as high as Rs 150 per kilo, making LPG the most expensive fuel in Pakistan.
LPG companies have imported record quantities in the month of December and sold their product based on a weighted average price of local and imported LPG which has helped in keeping prices affordable. However, the implementation of the levy which seeks to equalise the price of local product with imported in order to benefit certain importers will result in a sharp escalation in price.
The imposition of the levy is pure discrimination against local production which accounts for 80 percent of the country's requirements. Additional local production to the tune of 600 tons can be brought online within a short period and at a fraction of the cost of imports; yet the Government is keen to promote imports. The Government's decision to make LPG expensive is at odds with its policy to encourage its use to alleviate shortage of natural gas, said Belal.-PR