By Saad Hasan
KARACHI: Some marketing companies of liquefied petroleum gas (LPG) are using their eroding profits as a case to pursue government to de-link price of the fuel with the international market, The News learnt on Wednesday.
As demand for heating fuel continues to plunge in summer season, the representatives of these companies will meet petroleum ministry officials in next couple of days to present their views on the market situation.
They are arguing that introduction of import parity price (IPP) has caused an upsurge in retail price of the fuel, which has made it unattractive for consumers. LPG in Karachi was being traded at Rs45 per kg as compared to Rs50 a few weeks back.
“Supply has increased but retail price is still high and margins of the marketing companies have completely vanished,” said an aggrieved marketer, referring to the increase from imports.
He claimed that average consumer price of LPG has remained higher in last six months as compared to corresponding period of last year. “Ten thousand tonnes is lying in our storage tanks.”
However, government has succeeded in its objective of bringing price stability since it pegged the price of locally produced LPG with the Saudi Aramco Contract Price (CP) in January this year.
Introduction of import parity price for LPG opened doors for imports, which flooded the market and in ensuing weeks and months the marketing companies who were used to making profits on back of artificial shortages faced a price competition from their importing counterparts.
Contrary to claims of price being high, a comparison shows that in last six months LPG has mostly traded at rates below last year’s level when price even touched Rs70 for one kg.
With little or no holding capacity, the companies unhappy with the formula have to dump the fuel at loss, industry sources said.
International prices are high but the retail price is comparatively low because companies with no storage tanks are finding it hard to offload the fuel in a market that does not has any appetite, another marketer said. He said not much has been invested towards infrastructure that would supply LPG to rural areas and as a result all the 45 or so companies are vying for market share in urban centres.
“Situation will improve in coming months as companies extend reach to far-flung areas and auto-fuelling stations being to tap a larger market,” he added.