Daily Times

Importers of liquefied petroleum gas (LPG) are engaged in a battle to win better terms for their preferred borders, giving the state-owned producers of the fuel, free hand to sell LPG produced at wellheads on terms that violate rules and policy.

What started out as skirmishes over policy measures between importers of LPG and local producers a few months back has now turned into a full-fledged war between the sponsors of imports by sea and the two borders along the land route, documents accessed by Daily Times suggest.

Official documents and correspondence of LPG Marketers Association of Pakistan show that the Petroleum Division is torn over taxation proposals in a three-way fight among the importer by sea, who allegedly declared Iranian LPG as UAE-sourced, importers by land route and the local producers.

Amidst this wrangling, the policy makers at the Petroleum Division and Oil & Gas Regulatory Authority (OGRA) remain clueless but content with the collateral bounty of abundant LPG supplies.

The battle between competing importers is a boon to the state-owned producers of LPG. Once under strict scrutiny by the marketing companies for every minor deviation from the rules or the LPG Policy, the state owned producers now sell their LPG at auctions that violate the pricing regime. Rules allow LPG producers to sell LPG only for less than the maximum price for the month, but they conduct auctions for longer periods irrespective of whether the sale price exceeds the maximum in the next month.

Ministry officials are happy to stand by, knowing any intervention will attract a sharp reaction from the provinces that benefit from imports and will likely demand restrictive policies to be approved by the Council of Common Interests.

Only recently Prime Minister Imran Khan has been asked to intervene in the interest of limiting imports to the deficient quantities, along the lines of petroleum imports. This function is performed in the case of petroleum by the “product review meeting”, a conference of petroleum division, OGRA, refineries and oil marketing companies.

“Principally LPG prices should be equalized or the local production should be slightly cheaper, just as other local industries are given protection by the government,” suggested Mian Asad Ehsan, a renowned businessman, in an appeal to the Prime Minister.

The lack of confidence in the Petroleum Division, seen recently in the report of the inquiry commission tasked to investigate shortage of petroleum last summer, echoed in the appeal to the Prime Minister: “a final request that Ministry of Petroleum should not be asked to look into this matter, because for reasons best known to it, the Ministry officials are biased and partial towards the importers.”

It remains to be seen if this view remains valid after the Prime Minister has asked his Special Advisor on Petroleum to step down and the Secretary in charge of the Petroleum Division asked to report to the ominously named Establishment Division.

Bitterly opposed to imports through Taftan until recently, Pakistan LPG Marketers Association is seen canvassing that Federal Board of Revenue replicates at the Border Post near Gwadar the mechanism for collection of duties and taxes that has been in place at Taftan border.

LPG Marketers Association Chairman Farooq Iftikhar, who has led LPG marketing companies for more than a decade and been a part of several regulatory overhauls of the industry, wrote to FBR in February that the quantities imported at BP 250 are “under declared by 4 – 5 metric tons in each LPG bowser, thereby evading taxes on this quantity.”

The Association Chairman said in his communication of February, that alarmingly LPG was being assessed at a far lower value than that at Taftan border. This issue, sources in FBR said, was addressed when Chairman FBR took note of the anomaly last month.

Industry experts said all imports from Iran were priced significantly lower than the international benchmark, and only led to availability of cheaper LPG across the country.