Liquefied Petroleum Gas (LPG) is a cleaner commodity than petrol, diesel, wood, coal and fuel oil. Pakistan homes taking its best benefit as motorists use LPG in their vehicles, which is cost effective and convenient. LPG is environment-friendly fuel to both middle and lower class consumers and brings huge revenue for the government and providing employment to millions. It reduces air pollution by 90 percent in comparison to traditionally burnt biomass and can cut the consumption of fossil fuel, coal and wood etc. At present, LPG is mostly used by domestic consumers for cooking purposes where supply of natural gas is not available.
So to consider it (LPG) as a major industry there is a need to promote this precious commodity as a fuel and this sector should be treated as a major industry and be given all necessary facilities. LPG sector of Pakistan was playing an important role in economy by providing affordable and environment-friendly fuel to consumers.
Huge investment in LPG sector of Pakistan should be protected with favorable policies. Currently 1.2 million metric tons of LPG is consumed in the country annually by over 10 million households, commercial units and small industries.
Demand-supply likely to remain in balance
The Oil and Gas Regulatory Authority (Ogra) has issued 155 licenses for establishment of Liquefied Petroleum Gas (LPG) outlets of which seven have become operational. At present seven LPG Auto Refueling Stations are operational.
Increase in local LPG production, is likely to reach 2,500 tons a day from current 1,600 tons a day. A removal of international sanctions against Iran, LPG demand/supply situation is likely to remain in balance.
Price of the commodity remained stable over the past three years. It is not expected to further increase. The government wants to reduce imports of petroleum products. It also wants to reduce burden on local natural gas.
The Oil and Gas Regulatory Authority established under Section (3) of the Ogra Ordinance, 2002 has exclusive powers for granting licenses to carry out mid and downstream regulated activities of oil and gas sector.
The setting up of LPG auto stations will provide consumers additional fuel, which is environment friendly and cheap as compared to Motor Gasoline (Petrol).
Preference to Iran buying
Importers, distributors and marketing companies prefer to buy quality LPG from Iran’s reputed refineries through official banking channels. The stakeholders are likely to consider entering into long-term contracts with those Iranian refineries, which are producing quality LPG on the required specifications. A huge quantity of LPG is smuggled into Pakistan from Iran which deprives the FBR of duty revenue. It may be noted that Pakistani refineries are producing 1,500-1,600 tons of LPG daily whereas its local demand in summer stands at 1,700 tons and in winters it increases to 2,200 tons daily. The shortfall is covered by imports, in which Iran’s share is almost 80 percent.
Iraqi gas is also coming through land route. It is priced at $400 per tons (C&F) while the Iranian gas is available at $300-350 per tons.
Pakistani producers are selling it at $500-525 per tons, inclusive of all taxes. Consumers prefer purchasing LPG of Iranian origin. Market sources claim that the Iranian LPG is $100-125 per ton cheaper than the local LPG.
Plant in Nashpa area of Karak district
The Oil and Gas Development Company Limited (OGDCL) has approved establishment of Liquefied Petroleum Gas (LPG) plant in Nashpa area of Karak district. The plant would be established with a cost of Rs15 billion. With the establishment of the mega project not only economic activities would be accelerated in the area.
It would also provide employment opportunities to the local people on a large scale. The project would play a role in establishing industrial base in the area.
Consumption, business survival
LPG Association of Pakistan has appealed to the government to bring down LPG price of the local producers.
This would provide level playing field to local marketing companies as they are struggling for survival because of unfavorable business conditions.
The government is failing to provide LPG at cheaper rate to the masses and instead is involved in encouraging profiteering by auctioning local production of LPG at exorbitant rates by allowing and sponsoring government controlled enterprises to bid high in quota auctions.
Local producers of LPG are making additional profit while marketing companies are bearing huge losses.
Marketing company spends around Rs100 million for establishing its business besides providing employment to hundreds of families and contribute substantial revenue to the national exchequers.
The government is not taking measures to rescue the local LPG industry which is struggling for survival while importers importing low quality, LPG are playing freely.
The government is advised stop excessive import of LPG. This would lower price of locally produced LPG as it would also help overcome the issue of growing trade deficit.
The OGRA must come to the rescue of the consumers by responding to its national duty as regulator.
The government has launched a programme for laying off-grid distribution networks of liquefied petroleum gas (LPG).
Some 24 schemes are being planned. The idea and intention is good and is appreciated.