Daily Times

ISLAMABAD: The Oil and Gas Regularity Authority (OGRA) has awaken from its hibernation and has come to rescue the poor consumers from LPG mafia and proposed price at Rs 1,100 per cylinder of 11.8kg across the country.

OGRA authorities have also directed LPG producing companies to submit their audited accounts for the last three years in order to ascertain their financial position and the profit earned from fleecing the poor LPG consumers, it was revealed in a handout issued on Friday afternoon.

OGRA has received glut of complains against LPG producing companies for over-charging and playing havoc with lives of the poor people whose purses have shrunk due to their monopoly in the sector.

For the last three years, OGRA has been facing bitter criticism for not taking punitive action against LPG companies that had plundered the poor consumers by escalating the prices of the product without taking the regularity authority into confidence.

With change of senior hierarchy in OGRA, the regularity authority has now decided to give a tough time to the oil and gas mafia in order to provide relief to the people and to protect the poor from clutches of mafias.

The decision was made in the light of the court direction in which OGRA was directed to decide the matter of LPG pricing on a priority basis and resolve the issue between the consumers and companies, and to hold the whimsical policy of the companies. While complying with the court direction, OGRA conducted hearing of parties and keeping in view of the Ministry of Petroleum & Natural Resources’ advices from time to time. In this respect as well as under legal framework, in order to assess the reasonability of LPG prices, OGRA sought audited accounts for last three years from the LPG producing companies. The MP&NR on February 9, 2017 and February 10, 2017 proposed LPG prices and advised OGRA to proceed further with the objective to safeguard the interest of domestic consumers. In the above referred letters maximum LPG consumer price has been proposed at Rs 93,500 (Rs 1,100/11.8kg cylinder), including the base stock price at Rs 59,190 M.Ton, GST 17% and the balance as marketing & distribution margin at Rs 20,724 per M.Ton.

OGRA further advised LPG producing companies to submit the detail of revenues and cost in respect of their LPG business segment. The companies however submitted that no specific requisite data is available since LPG is a by-product of crude oil extracted during the refining process; no fractional/separate accounts are maintained in this regard. Resultantly, no adequate data is available to extract the meaningful information to ascertain the cost of LPG base stock. In this scenario, CP price (Saudi Aramco) and LPG base stock price quoted by LPG companies is the only available data to determine the reasonability of LPG price.

After extensive deliberation, OGRA observed that LPG consumer price is an aggregate of indigenous base stock price or imported C&F price, LPG marketing & distribution companies’ margin and applicable government taxes/levies. There is no specific parameter or reliable data, in terms of consistency and uniformity, to determine an accurate LPG price. This very fact has also been enshrined in honourable Lahore High Court in petition No 613 of 2012. Further, a uniform price applicable across the country cannot be determined owing to inherited limitations i.e; different freight from the source to consumer destination, base cost from different sources etc. However, a maximum LPG indicative price can be determined to set a ceiling in order to comply with the legal provisions and honourable court orders in the instant matter. It has been observed that MP&NR proposed latest LPG producer price at Rs 59,190 per M.Ton, however at the same time the price as quoted by LPG producers stands at Rs 54,000 per M.Ton. This deviation in LPG producer price required further analysis to arrive at a reasonable limit. In view of above, historical data with respect to quantity of LPG (local & import), LPG base stock price quoted by local producers, CP price quoted by Saudi Aramco, has been considered and analysis based on the data for past twelve months (February, 2016 to January, 2017) reveals that LPG local producer price is relatively observing market dynamics and CP price by Saudi Aramco. The LPG local producer price as such does not have its own set of parameters to compute the same, as submitted by LPG producers. Therefore, at this point in time, average of last three months CP by Saudi Aramco which works out to Rs 45,276 per M.Ton may be considered relevant data for the determination of February 2017 LPG price. The MP&NR has been of the view that this margin is relevant to market conditions. On the basis of above, the latest margin conveyed at Rs 20,724 per M.Ton, by MP&NR is adopted for the purposes of LPG price for the month of February 2017. On the above backdrop and deliberations, LPG price reasonability for the month of February 2017 has been computed.

It is clear from the above that imported LPG is totally deregulated activity and shall be supplied to industrial and auto sector as per the LPG Policy, 2016, while locally produced LPG is subject matter of regulation being a poor man’s fuel.