LPG stakeholders seek daily pricing amid soaring rates

LPG prices have skyrocketed following the closure of the Rahimdad-250 border post, prompting market stakeholders to call for a shift from monthly to more frequent pricing, similar to petroleum products, and for rates to be decoupled from Saudi Aramco’s Contract Price (CP). This demand is particularly urgent as winter approaches, a time when LPG consumption typically increases, leading to concerns about hoarding, blackmarketing, and artificial price hikes, especially in remote and mountainous regions.

The current LPG policy, unchanged for over a decade, no longer reflects the realities of the market.

Stakeholders argue that the policy, which is benchmarked to the Saudi CP, relies heavily on supplies from Iran, Oman, the UAE, and Iraq, including Iranian LPG allegedly smuggled through alternative sea routes. They contend that the advance monthly price notifications issued by the Oil and Gas Regulatory Authority (Ogra) dissuade major state-owned enterprises (SOEs) from importing LPG, leaving the market susceptible to private importers and land-route suppliers amid inadequate enforcement.

The recent withdrawal of electronic import form (EIF) exemptions for Iranian imports and shipments to Central Asian Republics (CARs) and Azerbaijan, as well as border closures, has further strained the supply chain, with over 4,500 tonnes of LPG stranded on the Iranian side.

Pakistan relies on LPG for about 70% of its consumption, with 30% produced domestically and the remainder imported. Of the 1.2 million tonnes imported annually, roughly 250,000 tonnes enter through Port Qasim, while nearly one million tonnes pass through Iranian routes, including Taftan, Mand, and Rahimdad-250. However, Taftan has been closed for nearly six months due to security concerns, and Mand experiences intermittent disruptions, increasing dependency on the Rahimdad-250 route.

Mohammad Ali Haider, vice chairman of the LPG Marketing Association, which represents over 200 companies, noted a Rs100 per kilogram price increase over the weekend following the trade exemption withdrawal and predicts further hikes without prompt action. He highlighted that no imports are currently arriving at prices based on the Saudi CP.

The war has driven oil prices to adjust daily, while LPG remains tied to monthly notifications that are disconnected from actual costs, making the Ogra’s benchmark increasingly irrelevant.

Major players such as SSGC, SNGPL, and Pak-Arab Refinery are avoiding imports at the notified rates due to fears of accountability investigations. Border disruptions have also pushed freight costs from $60-80 to as high as $380 per tonne. Haider accused parties of manipulating freight arrangements, submitting questionable import declarations, and lacking digital tracking of tankers, transporters, and distributors, which has enabled profiteering and tax evasion.

He also criticized a directive from the petroleum division requiring SOEs to auction LPG against signature bonuses, which he believes benefits cash-rich companies at the expense of transparency and consumer welfare. The Pakistan Petroleum Limited had previously allocated production through transparent bidding, offering 25 tonnes monthly to each successful bidder, but a secretive company reportedly bid a Rs220 million signature bonus for a five-tonne quota, raising suspicions of money laundering and consumer exploitation. Legal proceedings have stalled this process.

Haider urged the government to review the LPG policy in collaboration with stakeholders, revise the Rs35,000-per-tonne marketing margin established in 2016, implement digital tracking of imports and distribution, and publish daily prices on Ogra’s website. He questioned the utility of the Rs4,690-per-tonne petroleum levy introduced in 2016, which he argues fails to address price shocks effectively.