Exploitation of the government’s Liquefied Petroleum Gas (LPG) policy, 2015 and the related consessions led the private sector LPG importers to earn billions of rupees in an unfair manner. This was revealed during an emergency meeting called by the Petroleum Division to discuss the new LPG policy with relevant stakeholders on Sunday.
The 2015 policy entailed that while the local LPG producers paid 17 percent general sales tax (GST), the importers only had to pay 10 percent GST due to an incentive offered by the state-run Pakistan State Oil (PSO) and the Sui Southern Gas Company (SSGC). This additional levy was implemented to bring imported LPG and local production price at par with each other.
Furthermore, the LPG Policy 2015 also promised tax incentives for the PSO, and the SSGC, so subsidized LPG may be provided to the poor. However, the state owned companies could not import the sufficient quantity of LPG, which led the private sector to step in and reap substantial benefits at the peril of local LPG producers.
These incentives not only led the LPG importers to keep around Rs. 20 billion, but even in the revised draft, the Petroleum Division has proposed even more waiver of advance tax for the LPG importers, which will lead the importers to pocket even more money, Express Tribune reported on Monday.
The stakeholders raised concerns over this issue, saying that the private sector importers imported LPG in excess quantity, while the Petroleum Division and the Oil and Gas Regulatory Authority (OGRA) failed to implement the import rules.
As a result, the state-run LPG producers like the Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), and Pak Arab Refinery (Parco) had to reduce prices, which also caused losses to the national exchequer as the government is the major shareholder of these companies.
The Petroleum Division proposed in the new draft of LPG policy proposed an auction of the LPG quota on a monthly basis.
During the meeting, local LPG producers like OGDCL, Parco, PPL, and MOL also raised objections to auction off the LPG on a monthly basis instead of using the existing mechanism of allocating the LPG on a long term basis.
The local industry said that LPG marketing companies need to invest in building LPG storage. Therefore, long-term allocation of the LPG quota encouraged the LPG companies to invest in infrastructure.