"With the exception of those shipments whose Letters of Credit have been opened, all other import plans have been put on hold," Belal added. This is the second time Ogra has issued a price notification this year without consulting LPG stakeholders. The last notification issued in July 2012 had led to severe shortage of the product and was challenged in the Lahore High court which held it in abeyance.
The country lost 30 percent of its LPG production at the start of this month, when JJVL which produces 450 tons per day shut down its facility as a result of a fire accident. The suspension of supplies has affected nearly all LPG companies as JJVL also produces LPG for OGDCL. In order to cater to the gap and to meet the increased demand for LPG in winter, JJVL and other companies immediately began to import LPG. The landed cost of this product at Karachi''s Port Qasim is Rs 125,000 per ton, whereas it costs companies approximately Rs 9,000 per ton to transport the product to their respective plants.
"Without accounting for any overhead expenses other than transportation the landed cost of the product in mid country is Rs 134,000 per ton, whereas Ogra''s mandated sale price is Rs 133,388 per ton," said Belal. "Companies not wanting to violate Ogra''s orders have suspended supplies to the market as they do not want to sell at loss."
Unlike CNG which caters to only the automobile industry, LPG is widely used as an alternative to natural gas for homes, factories and the auto sector. Its use typically increases in the month of December as the Sui companies resort to gas loadshedding. Sources say that JJVL''s production is expected to resume by the end of December- leaving the market with a vacuum of some 15,000 tons of LPG for the month of December. With import plans scuttled and the market deprived of 30 percent of supply, the price of LPG is expected to cross Rs 200,000 per ton as companies have already begun to ration the sale of product to their distributors.