Pakistan will sell 90 per cent of its locally produced liquefied petroleum gas through open auctions held in front of the media, replacing a quota system that consumers and officials have long blamed for shortages and unfair prices. The decision was taken at the first meeting of a new LPG committee in Islamabad on Saturday, chaired by the secretary for petroleum, with Petroleum Minister Ali Pervaiz Malik in attendance.
Under the new mechanism, local producers will set aside 10 per cent of their output for state-owned marketing companies, which will supply gas to remote and hard-to-reach areas. The remaining 90 per cent will go under the hammer in transparent auctions, with each participating company allowed to buy no more than 20 metric tons a day so that smaller firms get a fair chance.
The committee will supervise the auctions, keep a daily check on production and supply, and review prices and bidding arrangements from time to time. Its members include the chairman of the Oil and Gas Regulatory Authority, the managing directors of the Oil and Gas Development Company and Pakistan State Oil, the president of United Energy Pakistan and the director general for liquefied gases.
The framework was approved by the federal cabinet on 4 November as part of a wider deregulation of the LPG sector. The government has also directed state-owned companies, including Pakistan State Oil and Pakistan LNG Limited, to arrange bulk LPG imports through government-to-government and business-to-business deals. Auction lots will be offered in quantities of five to ten tons, and the results will be made public.
Money raised above the producers’ base prices will flow into two new funds: a Price Stabilisation Fund and a Vulnerable Protection Fund, which are meant to provide subsidised gas to deserving households. The minister said the landed price of imported LPG, including premiums and other costs, could range between Rs450 and Rs500 per kilogram.
The scale of the challenge is clear. Pakistan uses about 2.4 million tons of LPG a year, while local production stands at only 2,000 to 2,500 tons a day, leaving the rest to be imported. The Competition Commission has been asked to watch for market manipulation and cartelisation as the new system takes hold.
