ISLAMABAD: The federal government has approved a new liquefied petroleum gas (LPG) policy, directing four state-owned enterprises (SOEs) to resume LPG imports through government-to-government (G2G) and business-to-business (B2B) arrangements to address supply shortages, curb excessive prices and introduce greater competition in the market.
Thank you for reading this post, don't forget to subscribe!At the same time, the Power Division has projected an increase of Rs2-4 per unit in electricity purchase costs for 2027, raising concerns about further pressure on electricity tariffs.
Announcing the LPG policy at a press conference at Pakistan Television (PTV) headquarters, Petroleum Minister Ali Pervaiz Malik said the federal cabinet had approved a comprehensive framework aimed at improving LPG availability, eliminating market manipulation and ensuring supplies at competitive prices.
He acknowledged that LPG shortages had emerged even before the onset of winter due to disruptions along Pakistan’s western borders, allowing some market operators to exploit the situation.
According to the minister, unscrupulous dealers were selling LPG at Rs700-800 per kilogramme in different areas, compared with the Oil and Gas Regulatory Authority’s (OGRA) notified maximum price of Rs295 per kilogramme for November.
Malik said that, based on Saudi Aramco’s Contract Price (CP) and prevailing import premiums, LPG prices could settle around Rs450-500 per kilogramme once imports by state-owned companies commenced. However, private-sector importers would remain free to arrange supplies at lower prices to compete in the market.
He added that Prime Minister Shehbaz Sharif had directed the government to provide subsidised LPG at Rs300-350 per kilogramme to deserving and vulnerable households identified through the eligibility criteria of the Benazir Income Support Programme (BISP).
The proposed subsidy will be financed through a dedicated account established under a clawback mechanism. The fund will receive the difference between the LPG import parity price and proceeds generated through auctions of locally produced LPG supplied by refineries and exploration and production companies.
The four state-owned companies directed to resume LPG imports are Pakistan State Oil (PSO), Pakistan LNG Limited, Sui Southern Gas Company LPG and PARCO LPG. Malik confirmed that these entities had already received supply offers from Saudi Arabia and Oman.
However, the proposed subsidised price of Rs300-350 per kilogramme for BISP beneficiaries would still be higher than OGRA’s currently notified maximum rate of Rs294.08 per kilogramme.
New LPG Pricing and Supply Framework
Explaining the policy’s operational structure, the petroleum minister said the government would abolish the existing quota system, which had allegedly benefited influential market players and restricted competition.
Local LPG producers will be required to auction their supplies in lots of five to 10 tonnes through a transparent and competitive process monitored by OGRA and the Petroleum Division.
Under the new arrangement, state-owned enterprises will import LPG in bulk and publish a base price linked to Saudi Aramco’s monthly Contract Price. The companies will disclose their average landed costs on their respective websites to improve transparency and provide market participants with clear pricing information.
OGRA will no longer issue price notifications for locally produced and imported LPG under the proposed framework. Instead, local producers will receive prices determined through competitive auctions, while the difference between the auction-based producer price and the SOE-linked base price will be transferred to the dedicated subsidy fund for eligible BISP households.
The Competition Commission of Pakistan, the National Explosives and Petroleum Safety Agency and OGRA have also been assigned responsibilities to address market collusion, enforce quality standards and monitor prices in coordination with district administrations.
Electricity Purchase Costs Expected to Increase
Separately, the Power Division has presented six scenarios for determining the rebased power purchase price (PPP) for January-December 2027 at a public hearing organised by the National Electric Power Regulatory Authority (NEPRA).
The projections indicate that electricity purchase costs, excluding taxes and other charges, could increase by Rs0.56 to Rs3.94 per unit compared with the current average of Rs25.32 per unit.
Central Power Purchasing Agency (CPPA) Chief Executive Officer Rehan Akhtar and Power Planning and Monitoring Company Chief Financial Officer Naveed Qaiser presented the estimates, outlining different assumptions regarding electricity demand, fuel availability and generation costs.
Under the base-case scenario, the power purchase price is projected to reach Rs27.31 per unit, representing an increase of Rs1.99.
The most favourable scenario estimates a price of Rs25.883 per unit, an increase of Rs0.563, although officials acknowledged that achieving these assumptions would be difficult.
The two worst-case scenarios project power purchase prices of Rs28.84 and Rs29.26 per unit, translating into increases of Rs3.52 and Rs3.94, respectively.
Two other scenarios, based on variations in electricity demand and improved availability of LNG and natural gas, estimate increases of Rs2.25 and Rs1.12 per unit.
None of the six projections assumes that the ongoing US-Iran conflict will continue into 2027, leaving the possibility of further cost pressures if international energy markets remain volatile.
The annual power purchase cost is estimated to range between Rs3.4 trillion and Rs3.8 trillion under the different scenarios.
During the hearing, industrial consumers criticised the government’s decision to establish additional entities and recruit employees at high salaries, arguing that administrative and institutional expenses were contributing to rising electricity costs.
NEPRA has reserved its decision and will issue its determination after reviewing the submissions and relevant records.
The proposed increase in power purchase costs, alongside ongoing challenges in the LPG market, highlights the broader pressures facing Pakistan’s energy sector as the government attempts to strengthen fuel security, improve market transparency and protect consumers from rising energy prices.
Story by Khaleeq Kiani
