The Pakistan Tehreek-e-Insaf (PTI) government is making its mind to scale down the prices of liquefied petroleum gas (LPG) by doing away with the withholding tax (WHT) of 5.5 percent on its import, and slashing general sales tax (GST) of 17pc to 10pc on domestic production.
And more importantly, 3 percent sales tax (ST) on LPG production will also be turned zero, reveals an official document on LPG policy, available with The News.
The Council of Common Interests (CCI), which meets on Nov 11, may take up the proposed LPG policy draft for approval. The same document also unfolds that the local production of natural gas that stood at 4bcfd 1-2 year back, is now tumbled to 3.2 bcfd, which will further be squeezed to just 1bcfd in 2030. And with increase in natural gas supply constraints, the use of LPG is increasing in the domestic households, even where natural gas pipeline networks may be available. “Further shifting to LPG is also expected being its more convenient and available fuel,” the document says.
Currently, LPG domestic producer price is fixed at Saudi contract price (CP) and now the domestic producer price discovery is to be made through a bidding process.
The government is also making its mind to provide direct subsidy for targeted areas through cash transfers like Ehsaas programme. And the similar method for provision of LPG will be adopted to the people of Balochistan or other such targeted areas including merged FATA areas, AJK, Gilgit-Baltistan. Moreover, special incentives will also be given for filling plants and LPG infrastructure.
The document says that the unabated expansion of gas distribution to urban and rural areas with growth in housing and residential demand. “The government will impose a moratorium and discourage expansion of the gas pipeline network. And only LNG-based new industrial connections will be encouraged.” It also says that the government will also stress appliance standardization and energy efficiency for all domestic consumption.
Pakistan is unique in having natural gas as the domestic household fuel, which is inefficient for distribution, while it has been fast depleting local gas reserves. The LPG is an obvious replacement for domestic household energy needs. The governments will encourage housing societies, commercial complexes and residential buildings to switch to LPG as fuel source for cooking and heating purposes.
And with a view to safeguarding against under investment by marketing companies, a producer price floor has been recommended to be set at 75% of the CP price (last month average). Producers will establish their own processes for efficient and transparent bidding and allocation of LPG. The govt will also remove advance income tax on import of LPG – similar income tax treatment on both imported and local LPG and it will be ensured that there is no additional sales tax on the LPG sale. However, the government will use Petroleum Development Levy (PDL) as a balancing number to equalise domestic and imported LPG prices.
And for Autogas or LPG for vehicles, the government will impose moratorium on use of LPG in transport vehicles and continue the ban on refuelling of 3 wheelers and public sector vehicles. The government will also discourage and impose phased ban on private sector vehicles. Moratorium on establishment of new Autogas filling stations will continue apart from discouraging the new development of LPG Air-Mix plants on the government expense, however, privately-owned and operated LPG Air-Mix plants for the new housing societies and high-rise buildings in the cities will be encouraged. For supply energy to the targeted areas, incentive for LPG bottling and refilling plants and direct subsidy for consumers will be considered.
The LPG is one of the most suitable fuels to move around as it has high energy density (energy content per unit volume) and low wastage or losses in handling. Due to ease in handling, transportation and distribution, the LPG is globally used as a preferred domestic fuel for residential and commercial consumers. The LPG is produced locally from wet gas fields (with higher hydrocarbon components), associated gas from oil fields, and by-product of crude oil refinery operations. LPG is also imported through dedicated LPG import terminals. There is also import of LPG from Iran via land route at Taftan border. Domestic LPG production contributed nearly 55% of consumption whereas 45% of consumption is met through import of LPG. In terms of final consumption of energy, 31.4% of the total energy consumption is in the form of natural gas. Over one fifth of this natural gas is consumed by domestic households. Currently, LPG constitutes only around 2% of the final energy consumption, around 40% of which is in domestic use.
