ISLAMABAD: Petroleum Division (PD) on Friday assured domestic stakeholders of Liquefied Petroleum Gas (LPG) ó refineries, marketing and petroleum exploration companies and dealers ó to take steps for providing level playing field to both local and imported LPG.
The assurance came at a stakeholders meeting presided over by Secretary Petroleum Mian Asad Hayaud Din. The secretary was informed that LPG upliftment from local refineries and oil and gas producers had been affected negatively after the governmentís decision to facilitate imported products through removal of regulatory duty and reduced sales tax.
Representatives of the refineries said their LPG storages were filling up because of lower off-take in view of imports and could affect their refining capacity and ultimately disturb the supply of petroleum products.
Refineries fear production cut amid falling offtake
An official, who attended the meeting, said secretary petroleum has asked the Oil and Gas Regulatory Authority (Ogra) to come up with a working paper to suggest what quantities of LPG would be required over the next four winter months so that the government could firm up its import estimates.
The representatives of LPG marketing companies and dealers told the meeting that players had seriously been disadvantaged because of tax and duty concessions given on imported products under the Supplementary Finance Bill 2018.
Despite three price reductions by LPG producers over the last 10 days, the imported product was still Rs2,500 to Rs3,000 per tonne cheaper than the local product, they said. This was benefiting a few importers and smugglers instead of 8-9 million LPG consumers as end-price had not dropped.
The Statutory Regulatory Order (SRO) issued by the Federal Board of Revenue (FBR) on Oct 3 allowed a waiver of regulatory duty on imported LPG amounting to Rs4,669 per tonne, whereas the local LPG would remain subject to Rs4,669 per tonne Petroleum Development Levy (PDL).
The local players asked the secretary petroleum to remove PDL on local product and reduce sales tax to 10 per cent to provide a level playing field to both imported and local products.
The meeting assured that a summary would be taken up in the upcoming meeting of the ECC to ensure fair competition.
Pakistanís total LPG requirement currently stand at around 1.2m tones, out of which the local production is 0.8m tonnes, leaving a shortfall of around 0.4m tonne met through imports from Gulf countries.
Of the total imports, about 250,000 tonnes are imported from Iran, about 125,000 tonnes from Iraq and around 25,000 tonne per year from Azerbaijan. The demand is growing at the rate of 10pc that has to be met through imports as local production is not seen increasing in short-term.
The meeting was told that exporters of Gulf countries normally fixed their export prices in line with Pakistanís local market and offered discounts on Saudi Aramco contract price (CP) to compete with local producer prices.
Normally, the freight on board (FOB) prices ranged between $80-100, apart from discount to Saudi Aramco CP. Sea freight was around $50 per tonne, making the CIF (cost, insurance and freight) price $20-40 lower than Saudi Aramco CP on which the Pakistani product is priced.