The government is unlikely to collect Rs 2 billion budgeted for fiscal year 2017-18 on account of Petroleum Development Levy (PDL) from locally produced liquefied petroleum gas (LPG) due to stay order by the court on the LPG Policy 2011. On October 3, 2011, the Lahore High Court granted a stay order against the government's LPG (Production and Distribution) Policy 2011 while conducting hearing in petitions filed by different LPG marketing companies.
The Lahore High Court suspended the policy, which bound the local LPG industry to pay a petroleum levy equal to the freight charges paid by LPG importers. In addition, it was mandatory to purchase at least 20 percent of their supplies from importers, or import LPG themselves.
A representative of LPG Association told Business Recorder that the levy originally enforced through the LPG Policy 2011, was opposed by local LPG producers due to its huge financial impact. According to an estimate of LPG producers and marketing companies, domestic consumers, mostly lower middle class, will be subjected to an increase of 11 percent every year due to LPG levy, he said.
"The federal government has prepared a plan to impose levy on locally produced LPG without taking into account ground realities of the energy sector", the representative of LPG alleged. Chairman LPG Association Irfan Khokhar told Business Recorder
that the government remained unable to collect Rs 2 billion PDL on LPG in financial year 2016-17 as the matter was sub judice. He added that the LPG Association was unaware that the government had included revenue from PDL on LPG in 2017-18.
The National Assembly approved the Petroleum Products (Petroleum Levy Amendment) Bill 2011 on November 25, 2011. However, Ministry of Petroleum and Natural Resources has yet to formulate rules and regulation of the policy. According to LPG Association, the gas is primarily used in areas where there is no piped gas and these are backward areas of the country where purchasing power is low. An 11 percent increase in price for such consumers represents a significant portion of their monthly income.
The Association further stated that it would put local producers at a disadvantage over importers and jeopardize the investment of domestic LPG companies and distributors while promoting the interest of importers. According to Oil and Gas Regulatory Authority (OGRA) more than Rs 2.38 billion investment has so far poured into LPG supply infrastructure whereas total investment is expected to be over Rs 22.33 billion in the coming days. Nearly 85 percent of the country's LPG requirements are met through local production, as opposed to other petroleum products whose imports account for a significant share of market supply.