By Saad Hasan
KARACHI: The marketing companies of liquefied petroleum gas (LPG) have strongly contested the government decision to take up price of local LPG to its import parity rate, saying retail price would now rise drastically.
The Economic Coordination Committee (ECC) of the Cabinet on December 6, 2006, decided to tag price of locally produced LPG with Saudi Aramco Contract Price (CP) to give incentive on imports for augmenting domestic supplies in times of shortfall.
The LPG, produced in Pakistan, is meeting 80pc of demand these days and is priced much below CP, making imports costlier when needed. The government believes this was the main cause the price shot up a number of times in the past.
However, the LPG Association of Pakistan (LPGAP) - a group of marketing companies - argues that the fuel produced domestically cannot be related to international market.
An executive of a Lahore-based company cautioned that the decision would translate into increasing one kg price of LPG by Rs20 to Rs60 from the present level of Rs40.
“Government should make arrangements for enhancing local production rather than increasing the price of something produced in the country,” he said on condition of anonymity.
He said local producers have increased LPG price four times within a year to Rs25,000 per tonne from Rs17,000 that caused fuel to inflate at retail level.
But Economic Adviser to Government, Ashfaq Hassan Khan criticised LPGAP for making hue and cry over the decision. “Local production can only be increased on the basis of incentive and this is exactly what has been done,” he said referring to the ECC decision.
He said the marketing companies and middlemen in LPG supply chain business have been making hefty profits and new price formula will eliminate their unfair margins by increasing competition.
On the assertion of LPGAP that price of LPG will increase by Rs20 per kg, he said Oil and Gas Regulatory Authority (OGRA) has been authorised to take action against unjust price hike. When asked how OGRA could take action when the sector has been deregulated by the government, he said the ECC has directed it to do so.