What the LPG price hike means for consumers

We can whine all day about the market but to be honest the liquid petroleum gas business is very lucrative, an LPG agency owner told SAMAA Digital.

The Oil and Gas Regulatory Authority (Ogra) has hiked the price of LPG across Pakistan by over 18% for January. According to an official notification, the price of LPG for consumers is Rs1,791.48 for a standard 11.8kg cylinder. This translates to around Rs152 per kg.

The prices set by Ogra depend on a number of factors, like the demand to supply ratio and gas shortfall or surplus, but the market price for the same gas is not what Ogra says.

“Ogra does not keep a check on prices set by gas plants that sell gas to gas agencies,” said Sohail, a worker at an LPG agency in Karachi. “There is a cartel that decides amongst themselves the prices of the day.”

He added that sometimes the prices are revised multiple times a day and nobody from the regulatory body bothers until there’s a media report on the matter.

“We receive a text message with the rates a night before but often when our trucks reach the plants near the Hub Chowk or Port Qasim LPG zones we are told about an increase.”

An official of the SSGC shared on the condition of anonymity that only people with a lot of money and influence can sustain or even enter this business. You can collect gas quotas using your influence and by means of bribes and with these quotas, stock the gas to hike the demand in the market and then sell the gas at inflated prices and people will buy, he explained.

“It’s the same in Pakistan across the board. All businesses do that. The LPG business is no exception,” he said.

“To tell you the truth, they have people in control in Sui gas and they know how to feign a shortage when there is none. Nobody can or will do anything about it,” he claimed.

But this fluctuation in rates does not always bother the agency owners as they mainly sell the gas to consumers and are not the end users. People whose businesses and homes run on gas are not, however, as sanguine about the shortage.

A rickshaw driver, Muhammad Wali, said that just a month ago he bought a kg of LPG for under Rs130 and now it costs between Rs160 and 170. “Our business is not as it used to be and people don’t understand when we charge them according to the rise in LPG prices,” he said.

According to Sohail, an average rickshaw consumes 4 to 5kg of LPG every day. “For each kg they refill, they earn more than a Rs1,000 from their rides. It’s a given.” This statement was more or less confirmed by rickshaw drivers that SAMAA Digital spoke to.

Restaurants and bistros that consume the most gas in comparison. On average, they use up to 45kg or more a week, compared to domestic consumers who use 2kg a week.

The owner of a bistro near Karachi’s Cantt Station said they cannot add the cost of hiking gas prices in the tea they offer or their consumers, usually from the lower to middle income class, will protest and stop coming to them.

This hike in official prices, according to SSGC marketing official Zulfiquar, is natural and driven by market factors. “The demand is high due to winters and thus the supply is costlier,” he said.

The earlier monthly increases in the run up to January were not as high; the monthly change since August to December was not more than 2%.

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