ISLAMABAD: Prime Minister Shehbaz Sharif has constituted an eight-member ministerial committee to review proposed reforms to the liquefied petroleum gas (LPG) policy amid rising market prices and supply disruptions.
Thank you for reading this post, don't forget to subscribe!The committee, headed by the petroleum minister, will examine proposals submitted by the Petroleum Division, including allowing state-owned enterprises (SOEs) to enter the LPG import business and assume responsibility for price-setting, replacing the existing regulatory mechanism.
The move follows protests by LPG marketing companies and dealers, who expressed concerns over the proposed policy changes, particularly the limited consultation with industry stakeholders. They also questioned the experience of SOEs in LPG imports and warned that a proposed levy on locally produced LPG could increase consumer prices.
The committee has been given one month to review the proposed reforms, cylinder standards and the local LPG pricing model before submitting a comprehensive report to the prime minister.
The development comes as LPG prices in the open market have climbed to Rs6,000–7,200 per 11.57kg cylinder, significantly above the Oil and Gas Regulatory Authority’s (OGRA) notified price of Rs3,296. Supply disruptions following the suspension of operations at the Iran border and reduced imports through sea routes have contributed to the price gap.
According to a cabinet summary, the proposed reforms seek to retain monthly LPG pricing while transferring the price-setting responsibility from OGRA to state-owned companies, including Pakistan State Oil (PSO), Sui companies, PARCO and Pakistan LNG.
Under the proposed mechanism, SOEs would import LPG in bulk and determine monthly prices based on Saudi Aramco’s free-on-board (FOB) contract prices, along with actual premiums, freight, insurance, incidental expenses and import taxes incurred during the preceding month.
The proposal also recommends that OGRA immediately discontinue issuing price notifications for both locally produced and imported LPG.
For locally produced LPG, the monthly producer price would remain linked to Saudi Aramco’s current-month contract price, adjusted according to the propane-butane ratio. Producers would receive the notified producer price, while the difference between the Saudi CP-linked price and PSO’s base price would be deposited into a dedicated fund to support low-income consumers through the Benazir Income Support Programme (BISP).
However, private-sector stakeholders have opposed the Saudi CP-linked pricing mechanism, arguing that a significant portion of Pakistan’s LPG imports originates from countries such as Iran and Oman.
The proposed reforms also include increasing the margins of LPG marketing and importing companies to a minimum of Rs50,000 per tonne from the existing Rs35,000 per tonne. The adjustment is intended to account for inflation, as the margins have remained unchanged since the 2016 LPG Policy. Revised margins would remain subject to competition.
The Competition Commission of Pakistan and OGRA would be responsible for preventing market collusion and ensuring competitive practices.
Another major component of the proposal is the establishment of a Producer-Price Differential Fund. Refineries and other local LPG producers would deposit the difference between domestic and imported LPG prices into a dedicated Public Account. The fund would be audited by the Auditor General of Pakistan and used to provide targeted subsidies to vulnerable consumers through the BISP scorecard.
The proposal further recommends allocating 10 per cent of locally produced LPG to state-owned marketers at producer prices to meet demand in Gilgit-Baltistan, the Northern Areas and other remote regions through cylinder supplies and existing air-mix plants.
The remaining 90 per cent would be allocated to prequalified bottling companies through transparent monthly auctions, with a minimum floor price set at five per cent of PSO’s import-parity price.
The proposed policy changes aim to expand the role of state-owned enterprises in LPG imports, streamline pricing and introduce targeted subsidies, although concerns from private-sector stakeholders remain over the potential impact on competition, supply and consumer prices.
Story by Khaleeq Kiani
