By Saad Hasan
KARACHI: Smuggling of liquefied petroleum gas (LPG) into an already oversupplied market during low-demand summer season has drastically lowered the profit margins of marketing companies, The News learnt on Wednesday.
Operating with limited storage capacity, the marketing companies who either import or lift the fuel from local producers, have been forced to dump 11.8kg LPG cylinder at as low a price as Rs450 against a cost of Rs443.
While official retail price has plunged to Rs43 from Rs50 per kg in last two days, the unorganized retailers in Karachi, commonly known as decanters, are charging above this level.
“About 100-120 tons of smuggled LPG is making its way into Karachi on a daily basis,” a trader said, adding that illegal trade taking place along the Pakistani areas bordering Iran has thrived since the government linked domestic price with international market from this year.
The middleman is flooding the market with cheap smuggled products at the prevailing rates, reaping profit without passing it on, he said and disclosed that certain non-governmental organizations in the neighboring Islamic republic were involved in the business.
“Never before has there been such a situation and if this persists, you will see marketing companies packing up their business,” a marketer said, dispelling the impression that lack of storage facilities has caused companies to offload fuel into the market.
He said substantial storage capacity has come up over the last couple of years and “every storage tank in the country was filled. But the irony is that there is no proportional drop in retail price.”
Total consumption of LPG has decreased to 1500 metric tons per day against domestic production of 1750 metric tons. The smuggled supplies and any imports are in addition to this.
While some marketers blame Punjab government’s action against two-stroke LPG-powered rickshaws and decanters for the sudden plunge in demand, others argue it is a result of too little investment in the storage.
“Companies which do not have required storage facilities are dumping fuel in the market,” said an official of one such marketing company.