The proposed regulatory duty on liquefied petroleum gas (LPG) imports has been withdrawn at the last moment from the new LPG policy draft, Express Tribune reported.
This means that the distortions in LPG prices will likely continue in the near future, especially since the domestic LPG producers continue to pay the petroleum levy.
The government had imposed regulatory duty on LPG imports, which was also later withdrawn. LPG is primarily being imported and at cheaper rates as compared to domestically produced LPG. The new LPG policy draft was aiming to resolve this issue.
A sub-body of the Cabinet Committee on Energy (CCOE) proposed the imposition of regulatory duty on LPG imports via land route. However, in the final policy draft submitted to the cabinet committee, scheduled to meet today (Wednesday), the sub-body withdrew the proposal.
In the draft, the sub-body had suggested that the petroleum levy be phased out gradually as the market moves towards the deregulated regime. It had also suggested that the Petroleum Division devise a transparent mechanism to periodically determine the level of petroleum levy.
Over the past two and a half years, LPG importers have gained a benefit of nearly Rs. 15 billion due to the reduced rate of general sales tax (GST). While the domestic LPG industry pays 17 percent GST, the importers pay only 10 percent GST. In the policy draft, the sub-body has recommended the application of a uniform GST on both imported and local LPG sales.
It also called for encouraging investment in the development of domestic production capacity and additional storages through fiscal incentives, like zero-rated imports of machinery and equipment and tax holidays.
The sub-committee had also brought detailed and comprehensive proposals for the supply side, demand side, efficient regulation, and division of roles for all stakeholders.
It remains to be seen whether the cabinet committee accepts these proposals. However, as per the latest reports, the clause on regulatory duty implementation has been withdrawn, prolonging the anti-competitive functioning of the LPG market in the country.