LPG price soars to Rs87 as supply drops

Source: The News

KARACHI: The price of liquefied petroleum gas (LPG) surged to Rs87 per kg on Monday as authorities remained oblivious to continuous exploitation of shortage of supplies by retailers, industry officials told The News.

Daily supply of LPG has dropped close to 1,400 tons from an average of 1,600 tons mainly on account of refineries, which do not find current price of LPG attractive in relation to the rates of crude oil they import, the officials say.

LPG price has risen to a record high in just a matter of weeks from Rs60-65 despite the fact that demand is normally low in this season.

Marketing companies are selling LPG at varying rates but the deregulated retail side has allowed decanters to charge prices at their will. "There is nobody to check this," said Malik Taimur Awan, Chairman LPG Retail Shopkeepers Association.

"There is no difference between an 11.8kg cylinder being bought at Rs770 from one distributor and at Rs925 from another. Decanters can literally charge Rs925 for all the stock and there is no one to question them."

Half of the LPG produced locally or imported is used in the transport sector, something which is illegal as its sale is allowed only from auto-fuelling stations installed with dispensers, none of which exists. The other half is consumed by people deprived of piped natural gas. Decanters are serving both classes of consumers with impunity.

Besides the lives this dangerous trade takes every year, it is an undocumented business which allows marketing companies, distributors and retailers to avoid taxes.There are over 60 licensed marketing companies for LPG, a fuel which has less than once per cent share in total energy market of the country. Most of these companies have not invested in any infrastructure and rely on LPG quotas obtained on political grounds.

Big multinational companies insist the present crisis in the LPG market is due to the government's control over prices at the producer level and a freehand allowed to decanters."Government's cap on price has led to this situation," said an executive of a marketing company, referring to official rates for producers. "The price will go up even further in coming days if this distortion is not removed."

Abbas Bilgrami, Managing Director Progas, said the government could help stabilise the market by providing space for imported product. "This situation has arisen due to shortage of LPG. It will improve if producer price is linked to import parity price, which is actually the same as it prevails now."

He said the demand of LPG would go up in coming months, especially when it would be used as an alternative to gas, which was short in supply. "We will need a lot of LPG and local production will not help meet that demand." Taimur Awan said the government should take action to check the price of LPG as its consumption would go up in the month of Ramazan.