LPG at up to Rs5,000 a cylinder: government orders action against hoarding ahead of winter

Key takeaways

• The Petroleum Division has written to Ogra about suspected hoarding of imported LPG, saying cargoes are not being lifted regularly from import terminals, Dawn reports.
• LPG is reportedly selling at about Rs5,000 per 11.8kg domestic cylinder, almost 50% above the Ogra-notified Rs3,296.
• Ogra has been asked to ensure supply at notified prices, especially in hilly, remote and off-grid areas.
• Separately, the Petroleum Division says it wants locally produced LPG sold through a transparent, competitive process, a plan now held up in court.
• The squeeze comes as LPG trucks are stranded after Pakistan suspended trade with Iran at Taftan and Gabd-Rimdan.

What the government says

In a letter to the Ogra chairman, the Petroleum Division said importers appear to be bringing in LPG in line with demand, but the imported volumes are not being regularly lifted from terminals, according to Dawn. That, it said, raises concerns of hoarding and an artificial shortage, which has pushed up prices, particularly where people depend most on LPG for cooking and heating.

The division asked Ogra to:

• take steps to prevent hoarding and ensure regular lifting and supply to demand centres;
• start enforcement so consumers get LPG at notified prices;
• focus on hilly, remote and off-grid areas.

Ogra in turn has asked provincial governments and port and clearance authorities to take corrective measures, Dawn reports.

Prices at a glance

Market prices vary by city; the Rs5,000 figure is as reported by Dawn and was not issued by Ogra.

Fight over local LPG

In a press release on 16 October, the Petroleum Division said a transparent mechanism to sell locally produced LPG through competition remains a government priority. It said local supply is currently concentrated among a few players and that a competitive process would give a level playing field while keeping supplies flowing to far-flung areas under the LPG Policy 2016. The matter is being pursued in court, and the government "reserves the right to exercise all available legal options", the statement said.

Business Recorder adds that Petroleum Minister Ali Pervaiz Malik said last week that a summary had gone to the federal cabinet to make LPG imports easier in an emergency, and that LPG prices are set by Ogra using Saudi Aramco's monthly contract price as a key input.

The Iran border factor

Supply could tighten further. Pakistan has suspended trade with Iran through Taftan and Gabd-Rimdan, and Dawn reports more than 4,000 tonnes of LPG a day had been coming in via Gabd-Rimdan alone. Traders warn of shortages in Karachi and higher open-market prices if the closure lasts.

What happens next

• Watch for Ogra enforcement action or raids on stockists.
• Ogra normally announces the next month's LPG price near the end of each month; the November rate will show where official prices are heading.
• A reopening of the Iran border crossings would ease some supply pressure.

This article is for information only and is not financial advice.