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ISLAMABAD: Three state-owned companies -- Pak-Arab Refinery Company (Parco), SSGC LPG Limited (SLL) and Pakistan State Oil (PSO) -- are reluctant to resume liquefied petroleum gas (LPG) imports until the government revises the pricing mechanism notified by the Oil and Gas Regulatory Authority (Ogra).
This is because soaring international prices have made imports commercially unviable.Under the existing pricing formula, the companies cannot recover the rising cost of imported LPG while selling the product at prices determined by Ogra, officials said, warning that the impasse could further aggravate supply shortages and push up retail prices ahead of the winter season.
“We are waiting for the new LPG pricing formula, which has been worked out by Ogra and government officials with input from the industry. It is expected to be shared with the prime minister. Once it is implemented, the three state-owned companies will start importing LPG,” a senior official of the companies told The News.
PSO and Parco in the past never imported LPG, but under new scenario on the direction of Federal Petroleum Minister, both entities have been tasked to import LPG to overcome LPG crisis in the country.
“The companies are hopeful that the revised pricing mechanism will be implemented by November 1, enabling them to start imports and improve domestic supplies.”
Meanwhile, consumers are already facing exceptionally high LPG prices in several parts of the country. Market rates have reportedly reached Rs600 per kilogramme in Lahore, Rs750 per kilogramme in Murree and more than Rs800 per kilogramme in Gilgit-Baltistan, substantially exceeding Ogra’s notified price of around Rs279 per kilogram.
Under the existing mechanism, Ogra determines LPG prices monthly by linking them to Saudi Aramco’s Contract Price (CP), adjusted for the exchange rate. The consumer price for October stands at Rs279.34 per kilogramme, or Rs3,296.23 for an 11.8-kilogramme domestic cylinder.
However, the formula does not adequately account for the additional costs incurred when LPG is purchased from the international spot market at a substantial premium over the Saudi Aramco benchmark.
According to industry officials, spot-market LPG is currently available at a premium of around $300 per tonne above Saudi Aramco’s Contract Price. Higher freight rates, increased marine insurance premiums and port handling charges have further raised the landed cost of imported supplies.
Importers argue that unless these additional costs are incorporated into the pricing formula, along with revised margins for marketing companies, distributors, transporters, bottling plants and retailers, commercial imports will remain difficult to sustain.
The proposed revision is expected to move the pricing mechanism towards a cost-and-freight (C&F) basis rather than relying on the existing free-on-board (FOB)-linked approach.
Under a C&F-based formula, the calculation would more directly reflect the cost of purchasing LPG and transporting it to Pakistan, although the final mechanism would need to specify how premium, insurance, port handling and other associated expenses are treated.
Industry estimates suggest that, under the proposed arrangement, the LPG price in Karachi could rise to between Rs400 and Rs450 per kilogram, compared with Ogra’s current notified rate of Rs279.34 per kilogramme.
