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LPG disappears from market

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Levy of 15 per cent GST and profiteering is stated to be the main cause of shortage

August 23 - 29, 1999

The acute shortage of Liquid Petroleum Gas (LPG) in Karachi has forced thousands of cab drivers and other private car owners, using LPG, to buy it at Rs 60 per kg against the official price of Rs 20 per kg or to go off the roads.

The price hike due to short supply has caused a big problem for a large number of taxi drivers and other vehicle owners who use LPG as a fuel for their vehicles.

Reacting over the situation, the association of taxi owners has urged the government to take immediate remedial steps as it may create a law and order problem otherwise.

They also staged a protest demonstration in front of Karachi Press Club to lodge their protest against what they called exorbitant increase in LPG prices.

Addressing the rally, representatives of tax drivers' union expressed concern over the situation and blamed the LPG dealers for creating an artificial shortage of LPG by hoarding the gas stock.

When asked to comment over short-supply situation, an official spokesman for a public sector marketing companies told PAGE that one of the reasons for short-supply was the routine suspension of production by the refinery for maintenance purposes which is a routine and done once in a year. He said that it is a temporary phase and normal supply would start soon. However, the fact is that the levy of 15 per cent sales tax on LPG and may be the greed of some dealers for making money altogether have resulted in shooting high the LPG prices.

Market sources also alleged that some of the marketing companies have slashed the LPG quota for Karachi by one third, consequently causing acute shortage as well as increase in retail prices from Rs20 to Rs60 per kg in Karachi.

According to a dealer, there was no shortage of LPG untill last month and the dealers were getting over 20 tonnes of LPG, that is about 1,860 cylinders, per day. Now the quota has been reduced from 20 tonnes to seven tonnes (620 cylinders). According to him, the companies have been directed by the federal government to cater to the need of rural areas and Northern Areas first as due to non-availability of gas people use jungle wood as fuel which is resulting in rapid deforestation especially in Northern Areas of the country.

Beside the short supply of gas, another reasons for increase in LPG prices is the imposition of the sales tax which has added an additional amount of Rs29.25 on each cylinder. Another market source without naming the importer said that a company had recently imported LPG but over 80 per cent of the imported gas was despatched to the upcountry.

The short-supply has proved a bolt from the blue not only for the poor taxi drivers and the commuters but also has seriously affected the daily business of over 160 dealers of various companies operating in Karachi.


In order to avoid downward revision of the revenue collection target like previous year, the CBR seems to be determined to hit the target of Rs356 billion for the current financial year.

In order to achieve that goal, it has imposed 15 per cent GST on energy sector including POL products, gas and electricity. The Federal Minister for Finance has claimed that the levy of GST would not affect POL and electricity prices but the consumer of gas will have to pay more. The Finance Minister's plea for levying GST on LPG, however, sounds ridiculous that decision for levy of GST on energy sector was taken by the caretaker government of Meraj Khalid some three years ago but was not implemented.


Against the total demand for gas, the consumption has been estimated at around 20 lakh tonnes of LPG per annum. Currently Pakistan's production capacity is around two lakh tonnes. An equal amount of two lakh tonnes of LPG is imported by 16 LPG marketing companies.


he marketing companies import LPG mostly from Iran under an import quota allotted to them.

Keeping in view the international oil prices which are soaring high now is the time for the policy makers to implement on its policy decision to switch over from oil to gas consumption which is comparatively much cheaper than the oil fuel.

The present government has a well defined policy to make natural gas as the fuel for the economy. The situation demands that practical steps be taken in the direction of that policy. All sorts of snags causing short-supply or price hike in gas sector should be checked strictly to give a helping hand to the economy struggling for its survival in Pakistan.

It is surprising to note that the CNG stations are providing gas to their registered customers alone. This attitude is discouraging the consumers to convert their vehicles from oil to CNG. Why this rationing has been allowed to the CNG filling station when the country is in a comfortable position as far as the availability of natural gas was concerned. This bureaucratic like attitude of the stations need to be rectified immediately.