LAHORE: The federal government is planning to change the pricing mechanism for liquefied petroleum gas (LPG), with Pakistan State Oil’s (PSO) landed import cost set to replace the Saudi Aramco Contract Price (SACP) as the benchmark for local producers from November 1, 2026, a move that could increase retail prices by 20-25 per cent.
Thank you for reading this post, don't forget to subscribe!According to The News, the petroleum minister verbally informed industry stakeholders about the proposed change during a meeting held on Tuesday with representatives of the LPG sector.
Under the proposed formula, local LPG producers would be allowed to charge prices capped at the landed cost of LPG imported by PSO, replacing the existing benchmark linked to the Saudi Aramco Contract Price.
Industry stakeholders estimate that the new mechanism could raise prices charged by local producers by up to 40 per cent. Since domestic production accounts for around 35 per cent of Pakistan’s LPG supply, while imports meet the remaining 65 per cent, the change could translate into a 20-25 per cent increase in retail prices, they said.
During the meeting, industry representatives questioned the legality of the proposed mechanism and raised concerns about its potential impact on competition, market stability and consumers.
Stakeholders warned that linking local prices to PSO’s import costs could expose the market to higher prices if imported cargoes were procured at elevated rates. They also raised concerns over past controversies involving LPG imports by Sui Southern Gas Company (SSGC), alleging that previous managements had faced scrutiny over suspected over-invoicing.
Industry representatives argued that the proposed formula could undermine competition, particularly if private companies were able to import LPG at prices below PSO’s landed cost.
Instead of adopting an import-cost-based benchmark, they called for complete deregulation of the LPG sector, allowing buyers and sellers to negotiate prices freely and enabling market competition to determine rates.
The proposed change comes at a time when LPG remains an important fuel for households and businesses, particularly in areas without access to piped natural gas. Any substantial increase in prices could add to household energy costs.
The News said it contacted Federal Minister for Petroleum Ali Pervaiz Malik for comment on the proposed policy change, but he was unavailable.
The proposed pricing mechanism is expected to take effect from November 1, subject to implementation by the government.
Story by Munawar Hasan
