In June 2000, the Cabinet decided to deregulate the LPG business with a view to making the sector more investment friendly, foster healthy competition among the players, improve safety standards and consumer services, etc. Prior to that, the erstwhile Ministry of Petroleum and Natural Resources (MPNR) (now Petroleum Division) was regulating LPG business in the country under LPG (P&D) Rules, 1971. The erstwhile MPNR was exercising the power to allocate LPG from all available sources to various investors/companies and would fix LPG prices both at producers'' and consumers'' level.
Giving the background, the sources said, in March 2001, LPG (Production & Distribution) Rules 2001 were promulgated to provide cover to the deregulation policy. Under the said Rules, LPG allocations made by MPNR prior to deregulation were given protection to the extent of terms of agreements signed between the marketing companies and producers. Subsequently, in March 2002, the Oil & Gas Regulatory Authority Ordinance, 2002 was promulgated to set up an Independent regulator and in March 2003, all LPG regulatory functions along with LPG (P&D) Rules, 2001 were transferred to OGRA. Thereafter the role of erstwhile MPNR was confined to policy formulation only.
The Cabinet was informed that consequently the domestic LPG market experienced various challenges including a demand-supply imbalance, cartelization, litigations and price distortions. LPG was considered a poor man''s fuel, yet the same was priced at over 20 times higher than natural gas for domestic consumers.
Realizing the importance of the issue, MPNR (now Petroleum Division) reviewed the issue in its entirety and concluded that price deregulation policy had failed to achieve its intended objectives of availability of the product at affordable prices. The situation warranted immediate intervention and MPNR (now Petroleum Division) considered it expedient to put in place a framework to regulate the LPG price both at producers'' and consumers'' levels.
The Cabinet was informed that with this background, a summary was submitted to CCI on August 25, 2015 for the approval of LPG Policy and allied issues. CCI in its meeting on February 29, 2016 approved the LPG Policy, 2015. However, implementation of the LPG Policy remained pending for want of amendments in Ogra LPG Rules, 2001. The LPG Rules have now been amended and Ogra requested for issuance of LPG prices. As per clause 3.4.1 of LPG Policy, subject to Policy Guidelines of the Federal Government, the Oil and Gas Regulatory Authority would regulate and notify the prices of indigenous LPG including Producers'' Price, Margins of Marketing and Distribution Companies and Consumer Prices.
The Cabinet was further informed that in order to implement LPG Policy, Ministry of Energy (Petroleum Division) proposed that the following LPG pricing committee may be constituted for issuance of guidelines to OGRA for LPG prices:(i) Secretary or Additional Secretary, Ministry of Energy (Petroleum Division), Chairperson;(ii) Managing Director, OGDCL, Member(iii)
Managing Director, PPL, Member;(iv) Managing Director, PARCO, Member;(v) Managing Director, PSO, Member;(vi) Managing Director, SSGCL, Member and ;(vii) Director General or Director (LGs), Directorate General of Liquefied Gases, Ministry of Energy (Petroleum Division).
The Cabinet was further apprised that LPG prices would be revised by Ministry of Energy (Petroleum Division) from time to time based on the recommendations of the LPG pricing committee.
After a detailed discussion, the Cabinet approved the proposal subject to inclusion of a representative of Federal Board of Revenue as member of LPG Pricing Committee. The LPG Pricing Committee would determine the price and Petroleum Division would intimate the price to OGRA, which in turn would notify it.
Copyright Business Recorder, 2017