Ministerial Committee to Review LPG Import-Parity Pricing Reforms
Prime Minister Shehbaz Sharif has formed an eight-member ministerial committee to review proposed LPG policy reforms within one month.
An eight-member ministerial committee has been formed to assess proposed LPG policy changes and deliver a report to the prime minister within a month. Prime Minister Shehbaz Sharif constituted the panel, headed by the petroleum minister, amid a sharp rise in LPG prices following supply disruptions. The committee will review proposed changes, cylinder standards, and the local LPG market model.
The committee includes the petroleum minister, the ministers for economic affairs and information, the prime minister’s adviser on interprovincial coordination, the special assistant on energy, the petroleum secretary, the director general of liquefied gases, and the head of the Government Relations Unit. Its task is to examine draft reforms from the Petroleum Division that seek to overhaul pricing and import mechanisms.
Proposed Import-Parity Pricing Model
The draft reforms shift LPG pricing from the regulator Ogra to state-owned enterprises using Saudi Aramco FOB rates plus import costs. State-owned enterprises would import LPG in bulk and set monthly prices based on Saudi Aramco's FOB rates plus actual premiums, freight, insurance, incidental expenses, and import taxes. The monthly producer price would be linked to Saudi Aramco's current-month contract price on an FOB basis, with adjustments for the propane-butane ratio.
When state-owned enterprises do not import LPG, the previous month's premiums, incidental costs, and taxes would apply alongside the current month's contract price. The plan would allow state-owned enterprises, including Pakistan State Oil, the Sui companies, PARCO, and Pakistan LNG, to introduce import-parity pricing.
Changes to Ogra's Role and Pricing Authority
The committee will abolish Ogra's price notifications and transfer pricing authority to SOEs. Under the proposal, Ogra would immediately stop issuing price notifications for locally produced and imported LPG. The reform retains monthly LPG pricing but removes Ogra's role in setting those prices.
The draft also proposes raising the minimum margin for marketing and importing companies from 35,000 to 50,000 rupees per tonne. To encourage larger market participation, it suggests exempting bidders from publishing financial offers on the PPRA website. The Competition Commission of Pakistan and Ogra would be tasked with preventing collusion among industry players.
Producer-Price Differential Fund and Subsidies
A new fund will collect price differences between local and imported LPG to subsidize vulnerable consumers via BISP. Local producers would receive only the producer price, while the difference between the Saudi CP-linked producer price and PSO's base price would be deposited into a dedicated Producer-Price Differential Fund. This fund would be audited by the Auditor General of Pakistan and used for targeted subsidies to vulnerable LPG consumers through the BISP scorecard system.
Ten percent of locally produced LPG would be allocated to state-owned marketers for remote regions through cylinders and air-mix plants. The remaining 90% would be allocated to prequalified bottlers through transparent monthly auctions, with a floor price set at five percent of PSO's import-parity price.
Industry Opposition and Market Realities
Private sector and industry stakeholders oppose the reforms, citing import sources and a lack of consultation. Private-sector stakeholders oppose the Saudi CP-linked pricing model, noting that most imports come from Iran and Oman, not Saudi Arabia. LPG marketing companies and dealers have objected to the policy being finalized without prior industry consultation. They cite the limited experience of state-owned enterprises in importing LPG and express concerns over a proposed levy on locally produced gas.
The opposition comes against a backdrop of significant market disparity. Current market rates for an 11.57-kilogram LPG cylinder range from 6,000 to 7,200 rupees, while Ogra's officially notified price is 3,296 rupees. Supply issues are a factor; operations at the Iran border stopped earlier this month, and sea route imports have declined.
The committee will submit its report to Prime Minister Shehbaz Sharif within a month to finalize the LPG policy reforms.
