Massive inflow of LPG through port, Taftan border continues

Reduction in Petroleum Development Levy (PDL) and General Sales Tax (GST) on imported Liquefied Petroleum Gas (LPG) has resulted into massive inflow of LPG to the country through port and Taftan border without any check in quality and quantity.

These revelations have been made by incumbent Managing Director (MD) of Oil and Gas Development Company Limited (OGDCL) in a letter to Secretary Petroleum Division titled as “Problems being faced by OGDCL and other domestic LPG Producers due to subsidized LPG imports”.

Highlighting the problems being faced by OGDCL and other domestic LPG producers due to reduction of PDL and GST on imported LPG, Shahid Salim Khan, MD, OGDCL has said that this has resulted into massive inflow of cheaper/poor quality imported LPG through the port and Taftan border without check in the quality and quantity. Similarly, this huge inflow has compelled all local LPG Producers including OGDCL to sell LPG at rates much lower than the Oil and Gas Regulatory Authority (OGRA) notified price in order to avoid lifting issues and closure of production at the fields, said MD OGDCL in his letter to Secretary Petroleum Division.

According to MD OGDCL’s letter, PDL on domestic LPG is 4669 while it is zero on imported LPG. Similarly, General Sales Tax (GST) on locally produced LPG is at 17 percent while only 10 pc is imposed on imported LPG price.

“It is pertinent to mention here that the forced reduction in price is consistently being done in the interest of maintaining continuity of operations otherwise non lifting of LPG would result in storage issues and resultant closure or curtailment of oil and gas production leading to major disruption of supplies of hydrocarbons in the country,” said Shahid Saleem Khan, OGDCL managing director in his recent letter dated 30th April, 2021to the Secretary Petroleum Division.

He added that aforesaid situation would result in direct financial loss to the country and national exchequer.

The MD OGDCL also informed Secretary Petroleum Division that since the recent winter season, OGDCL has been facing disposal issues from all its fields due to the influx of imported LPG.

As per comparison of price disparity between OGDCL and OGRA price, OGDCL notified price of LPG for the month of January, 2021 was Rs 79,500 per metric ton (MT) and OGRA notified price was at Rs 86,413/MT. Similarly, OGDCL notified price for February, 2021 was Rs 75,000/MT and OGRA notified price was at Rs 95,283/MT. Likewise, OGDCL’s notified price for March, 2021 was Rs 71,000/MT and OGRA notified price was at Rs 96,859/MT. Furthermore, OGDCL notified price for the month of April, 2021 was Rs 55,000/MT and OGRA notified price for the said month was at Rs 84,812/MT.

“ It needs to be appreciated that approximately 70 per cent of LPG demand is met by local production and any policy favouring private importers at the cost of domestic producers without assessing cost/requisite quality standards may result in loss to the government,” reads MD OGDCL letter.

It is worth mentioning here that incumbent MD OGDCL had on 29th January, 2021 written a letter to Secretary Petroleum Division with same title “Problems being faced by OGDCL and other domestic LPG Producers due to subsidized LPG imports”. But, no improvement regarding uplifting local LPG Producers and production as well has forced the MD OGDCL to once again sensitize the matter before the Secretary Petroleum Division.

Besides, the government constituted Inquiry Commission on petrol crisis in June 2020 has revealed that petrol smuggling has been causing Rs 240 billion annual loss to the national exchequer. However, after revelation of petrol’s smuggling, the disclosure of smuggling of poor quality of Liquefied Petroleum Gas (LPG) into the country has also been causing heavy loss to the national exchequer while this might cause closure of local LPG production in the near future.

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