Govt Plans Major Policy Shake-Up as LPG Prices Hit Rs. 7,200

As market rates for an 11.57-kilogram cylinder have surged to between Rs, prime Minister Shehbaz Sharif has formed an eight-member ministerial committee to review proposed reforms to Pakistan's liquefied petroleum gas (LPG) policy.

Key points

• 58.5 Billion as Cash Reserve Hits Record High.
• The growth has been proposed as an inflation adjustment to margins that have remained unchanged since the 2016 LPG policy.
• The private sector has resisted Saudi CP-linked pricing, arguing that most LPG imports originate from countries such as Iran and Oman.
• The Competition Commission of Pakistan and OGRA would be responsible for preventing collusion among industry participants.
• The growth follows the suspension of operations at the Iran border earlier this month and a decline in imports through sea routes.

In practice, the proposed changes would allow state-owned enterprises (SOEs) to take over LPG imports and cost setting from the Oil and Gas Regulatory Authority (OGRA), with costs subsequently passed on to private sector participants.

Meanwhile, the review follows protests by LPG stakeholders, including marketing firms and dealers. This person objected to the proposed policy being finalized without their consultation. The policy had previously been scheduled to take effect within a week. Pakistan Offers Saudi Arabia Tax-Free Oil Storage. New Fund Proposed to Subsidize LPG Consumers.

For context, the proposal calls for establishing a Producer Cost Differential Fund, with refineries and other producers depositing the difference between local and imported LPG costs into a dedicated Public Account.

Notably, the fund would be audited by the Auditor General of Pakistan and applied by the federal administration to provide targeted subsidies to vulnerable LPG consumers through the BISP scorecard.

Notably, the proposal additionally allocates 10 percent of locally produced LPG to state owned marketers at producer costs to supply Gilgit Baltistan, Northern Areas and other remote regions through cylinders and existing air mix plants.

For context, the remaining 90 percent would be allocated to prequalified bottlers through transparent monthly auctions, with a floor cost set at 5 percent of PSO's import parity rate. Pakistan Loses Qatar LNG Project. LPG Import and Pricing Reforms Under Review.

For context, the committee, headed by the petroleum minister, will review the proposed reforms, cylinder standards and the local LPG model before submitting a comprehensive report to the prime minister within one month.

Its members will include the ministers for economic affairs and information, the prime minister's adviser on interprovincial coordination, the special assistant on energy, the petroleum secretary, the director general of liquefied gases and the head of the Administration Relations Unit.

Industry stakeholders have triggered concern over the proposed shift, arguing that state owned enterprises have limited experience in LPG imports. They have additionally cautioned that a proposed levy on locally produced LPG could push rates higher and called on a greater role for the private sector.

OGDC Profit Surges 53% to Rs. 58.5 Billion as Cash Reserve Hits Record High. LPG Rates Rise Above OGRA's Notified Rate.

Market rates for LPG at present range between Rs. 6, 000 and Rs. 7, 200 per 11.57 kilogram cylinder, compared with OGRA's notified cost of Rs. 3, 296, according to documented market rates.

For context, the growth follows the suspension of operations at the Iran border earlier this month and a decline in imports through sea routes. It have tightened supplies.

In practice, the proposed reforms seek to introduce a new import and pricing mechanism under which state owned enterprises, including Pakistan State Oil (PSO), Sui firms, PARCO and Pakistan LNG, would lead the transition to import parity pricing. LPG to Obtain Cheaper. SOEs May Take Over LPG Import Pricing.

Notably, a cabinet summary proposes retaining monthly LPG pricing while removing OGRA's role in issuing cost notifications for locally produced and imported LPG.

Under the proposed mechanism, SOEs would import LPG in bulk and set monthly rates based on Saudi Aramco's free on board (FOB) rates, along with actual premiums, freight, insurance, incidental expenses and import taxes incurred during the previous month.

Notably, the summary additionally proposes exempting financial offers submitted by bidders from publication on the Public Procurement Regulatory Authority (PPRA) website, citing the urgency of the reforms and the need for greater participation by larger market players. 16-Hour Gas Loadshedding Reportedly Projected in Winter. Proposed LPG Pricing Linked to Saudi Aramco Rates.

In practice, the proposed framework would retain monthly producer pricing for locally produced LPG, linked to Saudi Aramco's current month contract cost (CP) on an FOB basis, with adjustments based on the propane-butane ratio.

While the difference between that rate and PSO's base cost would be deposited into a dedicated fund to subsidize lower income consumers through the Benazir Income Backing Programme (BISP), local producers would receive the Saudi CP-linked producer cost.

For context, the private sector has resisted Saudi CP-linked pricing, arguing that most LPG imports originate from countries such as Iran and Oman.

After a mechanism similar to the pricing system employed for petrol and diesel, if SOEs do not import LPG, the previous month's premiums, incidental costs and taxes would apply alongside the current month's CP.

LPG Rates Stay Above Rs. 500 Per KG in Lahore Despite Fresh Supply. LPG Firm Margins Proposed to Rise.

Meanwhile, the proposed reforms additionally seek to rise the margins of LPG marketing and importing firms to a minimum of Rs. 50, 000 per tonne from the existing Rs. 35, 000 per tonne.

For context, the growth has been proposed as an inflation adjustment to margins that have remained unchanged since the 2016 LPG policy. Nevertheless, the revised margins would remain subject to competition.

For context, the Competition Commission of Pakistan and OGRA would be responsible for preventing collusion among industry participants. Stay Connected with ProPakistani.

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In short, govt Plans Major Policy Shake is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.