The authority determined the LPG pricing on CP Price (Saudi Aramco) and LPG base stock price quoted by LPG companies. The LPG producing companies declined the advice of the OGRA regarding submission of details of revenue and cost in respect of their LPG business segment. The companies only submitted that no specific requisite data is available since LPG is a by-product of crude oil extracted during the refining process and no fractional/separate accounts are maintained in this regard.
The OGRA keeping in view the Ministry of Petroleum and Natural Resources' advices from time to time and legal framework, conducted hearings of parties ie PPL, Gold Gas, etc, in order to assess the reasonability of LPG prices. The OGRA recommended the LPG prices in compliance with the directive of the Lahore High Court on January 27, 2017. In ruling, the OGRA was directed to decide the matter of LPG pricing.
The Oil and Gas Regulatory Authority sought audited accounts for last three years from the LPG producing companies. The ministry on February 9 and February 10, 2017 proposed LPG prices and advised OGRA to proceed further with the objective to safeguard the interests of domestic consumers. The maximum LPG consumer price has been proposed at Rs 93,500 (Rs 1100/11.8Kg cylinder) including the base stock price at Rs 59,190 M.Ton, GST 17 per cent and the balance as Marketing & Distribution Margin at Rs 20,724 per MT.
After extensive deliberation, the 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 the Lahore High Court in petition No 613 of 2012. Further, a uniform price applicable across the country cannot be determined owing to inherited limitations ie different freight from the source to consumer destination and 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 the court's orders in the instant matter. It has been observed that MP&NR proposed latest LPG producer price at Rs 59,190 per MT, however at the same time the price as quoted by LPG producers stands at Rs 54,000 per MT.
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 MT 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 MT by MP&NR is adopted for the purposes of LPG price for the month of February, 2017. On the above backdrop and deliberations, the LPG price reasonability for the month of February 2017 has been computed as under: 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 LPG locally produced is subject matter of regulation.
Copyright Business Recorder, 2017