EXORBITANT LPG PRICES
It is the work of the authorities concerned to find out who increases the prices irrationally and for what motives.
KHALIL AHMED, Senior Correspondent
Oct 16 - 22, 2006
The Economic Survey of Pakistan 2005-06 reads that the average production of natural gas per day stood at 3,825 million cubic feet during July-March 2005-06 as compared to 3,663 million cubic feet over the same period last year, showing an increase of 4.4 per cent. Well, this increase is a drop in the ocean since it is not as high as the increase in the consumption level. On the one hand the increase in the use of energy indicates the economic activity and on the other hand it compels the authorities to meet the growing demand well in time to avert any impending shortage which by and large gives abnormal rise to prices leaving a negative impact.
It is believed that the use of energy has increased manifold everywhere in the world due to the rise in population and the comfortable lifestyle. The world needs to tackle the looming energy crises at once through alternate methods which will help in various ways and one of the benefits of alternate energy sources will be lower prices. Liquid Petroleum Gas (LPG) once used only for the domestic purpose has become one of the sought-after fuel options for transport in the country. LPG is being used as a transport fuel in some countries and there is a significant number of vehicles which run on LPG throughout the world.
Indian capital New Delhi is one of the biggest users of LPG in transport. It is said that LPG, once banned in our country as transport fuel and now approved as a transport fuel, is in great demand by the taxi/rickshaw drivers as well as old vehicle users and 50 percent of the daily LPG consumption goes to the auto sector. Large number of taxi and rickshaw drivers prefer LPG since it is one of the most economical fuel options. Well, when we talk about fuel economy, of course the use of gas was extremely economical until recently, to be precise, however, the skyrocketing gas prices might not make gas the best option in the days to come.
Basically, LPG should be used as a burning fuel in the remote areas of the country having no facility of natural gas to discourage the use of wood for environmental protection. Since this cheaper mode of fuel is being used increasingly as motor fuel, the prices have shot up over the period of time, leaving the general consumers as ultimate sufferers. It is a fact that the petrol sales plummeted by over 10 per cent in 2005-06 due to rising gas consumption and this has given rise to the gas prices because of the rising gas demand in the country.
In November 2002, the consumers paid Rs360 for a cylinder against the fixed rate of Rs320. In Karachi during September 2004 consumers paid Rs475 for one LPG cylinder (11.8-kg). There was a significant increase in LPG prices in the first nine months of the year.
After the intervention of the authorities for the reduction of the price by Rs95 per cylinder, LPG prices in Karachi dropped to Rs37 per kg from Rs43 per kg in October 2004 which provided some relief to the end-users. During the current year in August, LPG prices in Karachi surged to Rs 50 per kg, a rise of around Rs 6 during the month. The LPG rates at present are Rs55 per kg which might compel the users to think of some other fuel source, if available. In the mid of the last month a local newspaper reads that consumers may have to pay Rs5 to Rs10 per kg more for liquefied petroleum gas (LPG) in coming days following Rs3,720 per ton increase made by Oil and Gas Development Company (OGDC) on September 16. It must be noted that the taxi and rickshaw drivers are charging 100% more what they used to charge from the commuters a year back in Karachi. This is not their fault as they are paying more for the fuel. The producers have increased prices of LPG manifold this year. What could be the main reason for the increase in LPG prices. Is it the wide gap between the supply and demand? If it is the shortage of supply, why isn't the supply met by the local producers and the importers? Is the situation really not in control? Is it because of the international hike in energy prices? Will the prices continue mounting and the consumers will be fleeced on regular basis? When we look at the international level, we come to know that hike in energy prices is the issue everywhere in the world and there are political tensions in the world also because of one country charging more from the others i.e. Russia demanding high gas prices from its neighbouring countries. 25% gas used in Europe is imported from Russia.
The consumption level of LPG is growing in Pakistan and high petrol prices are one of the major reasons for it. By the end of 2004 per capita LPG consumption in the country stood at four kilos per annum and today it could be guessed that the consumption might have doubled. Reliable sources quote that the daily LPG consumption is around 2,000 tons against the production of 1,600 tons per day. This leaves us with the gap of around 400 tons daily (and perhaps around 600 tons in winter due to high demand in upcountry) which is perhaps the basic reason behind the misery of the common man. It is said that per day production has increased from 1,000 tons to 1,600 tons over the period of one and a half years. It could well be said that in case proper and timely action is taken with the prediction of future consumption, the inevitable can be eschewed for the benefit of the masses and the economy as well. Let's look at the production. Sources quote that a couple of years ago when the total production of LPG in Pakistan was around 1,000 tons a day, the contribution of Pak Arab Refinery Limited and OGDCL was 450 tons and 200 tons, respectively. However, at present the OGDC produces 525 metric tons LPG daily, a significant increase whereas PRL produces around 35 tons of LPG on daily basis. In case the production level by the producers is increased and import is facilitated by the concerned authorities, improvement could be witnessed in terms of price and availability.
The LPG sector, a deregulated sector, according to sources, has increased the prices for various reasons. Well, we need to be sure who increases the prices; producers/importers or distributors/retailers. Of course at the end of the day, it is the retailers who are blamed perhaps for the fault not of theirs. There is a perception that the producers increase the prices which is followed by the distributors and retailers. This is the work of the concerned authorities to find out who increases the price irrationally and for what motives. The increase in price at times may be justified but the constant price hike does not provide any cogent reason. There could be various reasons for the hike in LPG prices. It could be high import prices, tax relief (sales tax and custom tax) not provided by the authorities when it is the need of the hour, irrational increase at times by some marketing companies, shutdown of some refineries for the annual maintenance, growing demand by the down-trodden citizens, high international petrol prices which have come down from $78/barrel to $59/barrel etc.
Well, LPG will be used in vehicles (rickshaws, old taxis and old model private cars perhaps due to its pungent smell) and this will further increase the demand leading the further price hike. It could well be predicted that per day LPG consumption in a year's time may touch around 3,000 tons in Pakistan.