New LPG policy: OGRA price cap ends, state firms to import; LPG seen at Rs 450 to Rs 500 a kg

The federal government has approved a new LPG policy that ends OGRA's monthly price notification for LPG and sends four state companies back into importing gas, Petroleum Minister Ali Pervaiz Malik announced at a news conference at PTV headquarters in Islamabad on Tuesday, Dawn reported. The minister expects LPG to settle at Rs 450 to Rs 500 a kg once state imports arrive, against the Rs 700 to Rs 800 a kg some sellers have been charging.

What changes under the LPG policy

• No more OGRA price cap. OGRA will stop notifying a maximum price for both locally produced and imported LPG. Its November cap was about Rs 295 a kg, which most of the market had stopped following during the shortage (our LPG price page tracked it).
• State companies import again. Pakistan State Oil, Pakistan LNG Ltd, SSGC-LPG and Parco-LPG will import under government-to-government and business-to-business deals. Saudi Arabia and Oman have already made supply offers, the minister said.
• A published base price. The state importers will buy in bulk and publish a monthly base price linked to Saudi Aramco's contract price, disclosed as the average landed cost.
• Local LPG goes to auction. Refineries and exploration companies will sell their LPG in lots of 5 to 10 tonnes through auctions watched by OGRA and the Petroleum Division. The quota system, which the minister said benefited influential groups, is abolished.
• Private importers stay. They can keep importing and may undercut the state price.

A cheaper rate for BISP families

The Prime Minister has directed that households eligible for the Benazir Income Support Programme get LPG at Rs 300 to Rs 350 a kg. The subsidy comes from a new account fed by the gap between import parity and the auction price of local LPG, a clawback on producers. Dawn noted that even the subsidised rate is above OGRA's last notified cap of Rs 294.08 a kg.

What it means for your cylinder

At the minister's expected Rs 450 to Rs 500 a kg, an 11.8 kg domestic cylinder would cost roughly Rs 5,310 to Rs 5,900, our arithmetic, against Rs 8,260 to Rs 9,440 at the Rs 700 to Rs 800 a kg some shops have been asking. That is cheaper than this month's black-market rates but well above the old OGRA cap of about Rs 3,470 a cylinder. No date for the first state cargo was given, so prices will not move until ships arrive.

Policing prices moves to OGRA, the Competition Commission of Pakistan and the National Explosives and Petroleum Safety Agency, working with district administrations on collusion, quality and overcharging.

Background

The policy was put on hold last week when the Prime Minister formed a committee to review the plan to end OGRA pricing (our report), and LPG marketers have threatened a strike from 16 November over the pricing formula (details). Supply has been short since the disruption on the western border, and winter demand is rising.

For your gas bill on the pipeline network, see our gas bill calculator.