The attempt of vested interest in the LPG import lobby in connivance with the energy sector officials to push through LPG policy heavily favoring the importers lobby is stalling since even the LPG producers in the public sector are up in arms against the policy.
Last Sunday, Ministry of Energy tried to bring onboard various stakeholders in a hurriedly called meeting and pushed for approval of the draft. But there was no success, as local producers are seeing losses in billions if the proposed policy in its current shape is approved. The international E&P companies have already communicated their reservations to the Prime minister and ministers like Hamamd Azhar and Asad Omar or previously Omar Ayub Khan and Nadeem Babar.
Many stakeholders including the local producers and distributors questioned the motives of the hurriedly called meeting. Reportedly the ministry was trying to just fulfill a formality as in the last CCOE meeting the chair, Federal Minister for Planning, Asad Omar, had shown his displeasure that apparently stakeholders were not consulted and it was important to take them onboard.
Previous LPG policy was approved in 2015 and had created quite a balanced market situation between the producers, importers and distributors. The real distortion in the market was created in 2018 when the regulatory duty on the import was removed and also the GST was reduced for importers to 10% whereas the local producers was paying 17% percent GST.
As a result of this massive tax break, importers started to flood the market with imported gas as there was no check on the requirement. It is alleged that the importers have pocketed around Rs20 billion in the last three years and the consumers have had no benefit
In the new proposed policy, the Petroleum Division is favoring to further waiver of advance tax for the LPG importers, giving them more incentives to import.
The stakeholders have serious reservations on the way the new policy benchmarks the import price of LPG. Previously it was Saudi Armaco CP price plus 50 USD/ton which now sources say has been jacked up to 80 USD/ton. Giving an impression that importers needed incentives as their landed price was high. While the ground reality is that most of the LPG was imported from Iran which is heavily discounted.
The local producers and distributors have bene asking the policy makers to at least share with them the last three years import data to show what was the exact import price of the importers. But the government in various meetings has never shared the data.
The producers have also severe objections on the new proposal that the local producers should auction LPG produce for the marketers and distributors every month. That the local industry claims was a cumbersome process and would discourage the distributors and markets from investing in infrastructure as they won’t have long term product supply assurance.
Sources in energy sector said that the proposed system could upset the whole energy supply chain because if the refineries that produce LPG were not able to off loaf product these will have to slow down off tale of crude from the local E&P companies, in turn the local E&P companies will have to reduce production from the fields that will impact both crude and natural gas supply, causing energy shortages in the country very often.
