A new local LPG allocation reserves 10 per cent of locally produced gas for state-owned companies, in the first step towards running the fuel through open auctions. Private bidders will be allowed to buy no more than 20 tonnes a day through the new system.
The committee held its first meeting in Islamabad on Saturday under the secretary petroleum, with Federal Minister for Petroleum Ali Pervaiz Malik also in attendance, Dawn reported. It decided that indigenous producers would allocate 10 per cent of their output to state-owned LPG marketing companies for supply to hard areas, while the remaining 90 per cent would be offered through transparent auctions held in the presence of the media.
The applicable rate for public sector companies would be the producer price, based on the CP rate, which is the Saudi Aramco free-on-board price. The arrangement aims to improve access to LPG, particularly in remote and underserved areas, while ensuring wider market participation.
Local LPG allocation: committee to oversee auctions and supply
The meeting marked the first step towards operationalising the LPG auction framework approved by the federal cabinet on November 4. The committee is mandated to oversee auctions of indigenous LPG, review market supply arrangements and periodically assess pricing and bidding mechanisms.
The committee comprises the Ogra chairman, the managing directors of OGDCL and PSO, the president of United Energy Pakistan, and the director general for liquefied gases.
The meeting also decided that daily LPG production would be closely monitored, with production figures presented to the prime minister to ensure effective oversight of the supply situation.
In a statement, Ali Pervaiz Malik said the restriction limiting each company in the auction to a maximum of 20 tonnes per day was intended to provide a level playing field and fair opportunities to all participants.
Marketers call the plan an eyewash
LPG marketing companies, however, termed the government’s move an eyewash. They said it was aimed at diverting attention from the real issue, a shortage caused by the closure of the Iran border.
The Pakistan LPG Marketers Association (PLMA) said the new committee was moving ahead in a directionless manner. Ali Haider, the association’s senior vice chairman, said high prices were the result of black marketing, which was being fuelled by a shortage of supply.
“Our major needs are met through LPG coming from Iran, and a crisis emerged after closure of the border,” he said. He added that local LPG production accounted for around 30 per cent of total consumption, meaning the 10 per cent allocation to the public sector would not even reach ordinary consumers.
Pakistan consumes around 7,000 tonnes of LPG a day, while only about 2,100 tonnes are produced locally. Ten per cent of local production would amount to just 210 tonnes a day, a small share of daily demand.
What marketers want instead
The PLMA has urged the government to cut the cost of imported LPG rather than ration local output. Haider said the best way to reduce prices on imported LPG would be to cut the 19 per cent sales tax on imports to 10 per cent, exempt the 5.5 per cent withholding tax, waive terminal charges or reduce them by 50 per cent, and lower port-related royalties.
He warned that prices would actually rise following the bidding process, and that companies with greater financial resources would eventually take control of the market.
The disagreement sets up a clear test for the auction framework. The government says transparent bidding will end unfair pricing and improve supply to hard areas. Marketers say the numbers do not add up while imports remain costly and the Iran border stays shut.
The LPG decision follows a week of movement on fuel prices. Petrol has fallen to Rs346 a litre after the fifth straight price cut, and the government has already said fair pricing of LPG is a priority. At the same time, the regulator has notified a Rs2.36 per unit fuel adjustment on electricity bills, while refineries face negative margins on petrol as prices fall.
Frequently asked questions
How much local LPG will go to state-owned firms?
State-owned LPG marketing companies will receive 10 per cent of locally produced LPG. The remaining 90 per cent will be sold through transparent auctions held in the presence of the media.
How much can a private bidder buy each day?
Each company in the auction may buy at most 20 tonnes of LPG per day. The petroleum minister said the cap was meant to give every participant a fair chance.
Why do marketers oppose the plan?
The Pakistan LPG Marketers Association says the plan will not ease the supply crunch, because the shortage comes from the closure of the Iran border. Local output covers only about 30 per cent of daily consumption, so 10 per cent of it amounts to just 210 tonnes a day.
What does the association want instead?
It wants the government to cut the 19 per cent sales tax on LPG imports to 10 per cent, exempt the 5.5 per cent withholding tax, reduce terminal charges and port royalties, and extend the permitted demurrage period.
