LPG marketers reject government's proposed new LPG pricing formula

The Pakistan LPG Marketers Association (PLPGMA) has rejected the government's new LPG policy and pricing formula, according to Nawa-i-Waqt. The association warned that ignoring the private sector and expanding the role of state institutions would lead to inefficiency, corruption and higher prices for consumers.

ProPakistani reported that Pakistan plans to move LPG pricing from a government-regulated system to a market-based model, with import costs determining prices. The proposed changes have been sent to the Cabinet for final approval.

Under the proposal, OGRA would stop issuing monthly price notifications for locally produced and imported LPG from November 1, 2026. State-owned companies would lead bulk LPG imports and set monthly base prices. These include Pakistan State Oil, SSGC LPG Limited, PARCO Pearl Gas Limited and Pakistan LNG Limited.

Their pricing would be tied to actual import costs rather than OGRA's notified maximum price. The formula would account for the Saudi Aramco Contract Price, import premiums, freight, insurance, incidental expenses and import taxes paid by PSO and/or SLL in the previous month.

Under the current framework, OGRA sets maximum prices using the Saudi Aramco contract price on an FOB basis plus a fixed margin of Rs. 35,000 per metric ton. The Petroleum Division says this fails to capture extra import costs such as premiums, shipping, insurance, port handling and terminal fees. The fixed margin has not changed since 2018, while diesel prices rose about 205 percent and the rupee lost about 155 percent of its value.

Average LPG prices at filling plants between January and July 2026 were reportedly Rs. 60 to Rs. 79 per kilogram above the official consumer price. The gap peaked at Rs. 158 per kilogram in March, and market prices carried a premium of 11 to 70 percent over the notified limit.

The plan would create a Producer-Price Differential Fund in the Public Account to collect the difference between the import-parity base price and the Saudi Aramco-linked producer price. The Auditor General of Pakistan would audit it. Money in the fund would fund targeted subsidies for vulnerable households meeting BISP criteria or the government-approved poverty cut-off.

The Petroleum Division is to draft operational guidelines within one month, in consultation with the Finance Ministry and BISP, and the subsidy framework would be reviewed annually. Companies would set their own margins and freight costs, while the Competition Commission of Pakistan and OGRA would guard against collusion. Petroleum Levy, Federal Excise Duty and sales tax would continue.