In Pakistan, there is a huge difference between the government price of LPG and the price available in the market. Because of this, people have to buy gas at almost double the government price.
Muhammad Sagheer, resident of Islamabad, is also one such customer. According to the government organization Oil and Gas Regulatory Authority (OGRA), the price of LPG is around 295 Pakistani rupees per kg. But Muhammad Saghir recently bought a 12 kg domestic gas cylinder for Rs 6,500. That means they had to pay more than Rs 550 for one kg of gas.
Muhammad Saghir doesn't know where he can get LPG at the government price or whether he can even get gas at that price. But he knows how badly the rising gas prices over the past few weeks have affected his household expenses. According to them, the situation has become so bad that they have had to withdraw their children from school.
He says, "For the last few months, the prices of gas cylinders have been increasing every 10 days. Now the situation is such that we cook one meal, but there is no gas left to cook the next meal." A major part of Muhammad Saghir's monthly earnings is spent in purchasing LPG cylinders.
He and his wife work to support their two children and their father. His wife also takes care of the household chores. His family lives in a room on the roof of a building in a private housing society in Islamabad. There is no gas connection through pipeline. There is not even a door to close that room. It is not possible for them to keep the room warm in winter. The situation of many families from economically weaker sections of the country is similar.
In many private housing societies, either there is no pipeline gas connection or even after having the connection, gas is not available. Because of this, the families living there are completely dependent on LPG cylinders. Muhammad Saghir does not understand why he is not getting gas at the government price fixed by OGRA. However, the government has recently answered this question.
Pakistan's Energy Minister Ali Pervez Malik recently admitted in a press conference that LPG is being sold in the open market at a price much higher than the government price. He attributed this to the chaos and black marketing created by the closure of Pakistan's western borders after the US-Iran war. However, he said that even before the onset of winter, LPG supply had started being affected due to the closure of the border with Iran.
Ali Parvez Malik said, “Taking advantage of this situation, people who want to earn more profits started charging around Rs 700 per kg for LPG.” According to Ali Parvez Malik, this is not the only reason for increasing prices. Deficiencies in the system of importing LPG and lack of facilities to store the gas are also major reasons for this problem. On the other hand, there is no facility for ships carrying gas to stop at Pakistan's ports.
He says, "And even if big containers of gas arrive, where will we keep the gas? There is no arrangement for this. No work was done in this direction during the previous government." According to the Energy Minister, another major reason for the increase in prices is the quota system implemented for import and sale of LPG. Only a few people get its benefit. He said that under the new LPG policy, the government is ending the monopoly of some people and bringing such a system in which there can be competition among the companies.
According to Ali Parvez Malik, the demand for LPG every day in Pakistan is around 6,500 to 7,000 tonnes, whereas its production in the country is only around 2,000 to 2,500 tonnes.
Due to increase in LPG prices, the expenses of restaurants, hotels, tandoors and other small food-related businesses have increased significantly. LPG consumption is more in big restaurants. To meet their needs, a large number of large cylinders are required.
Khizar Shah, manager of a restaurant in Islamabad, told BBC that he uses a 45 kg cylinder. A month ago its price was around Rs 14,000 to Rs 15,000, which has now increased to Rs 24,000 to Rs 25,000. He says, "We use one cylinder every day. Our expenses have increased manifold due to the increase in prices. Business is already slow in winter. If gas is not available or becomes expensive, the business will come to a complete halt."
According to him, due to non-availability of gas from the pipeline, restaurants are completely dependent on LPG. “If LPG runs out or becomes so expensive that we cannot buy it, we will have to close the restaurants,” he says.
Naveed Ahmed, who runs a hotel in Quetta, the capital of Balochistan, says that due to gas cut and rising inflation, he has had to close two out of three of his hotels. He says, "Now we are running only one hotel. Gas is available only for five hours and the price of LPG has reached Rs 600 per kg."
Ziaur Rehman, who runs a tandoor in Peshawar, says that due to the increase in the prices of both flour and gas, his earnings have almost ended. He says, "A bag of flour costs Rs 14,000 and the price of gas has gone up to Rs 600 per kg. We sell small roti for Rs 20 and big roti for Rs 30. So now there is almost no profit left."
According to Lail Shah, owner of a local hotel in Peshawar, he has not been able to pay salaries to his employees for the last ten days. “If the situation continues like this, I will have to close the hotel,” he says.
According to Energy Minister Ali Pervez Malik, the government has very little role in deciding the price of LPG. The reason for this is that the starting price of LPG in the international market is linked to the fixed price of Saudi Aramco, whereas in Pakistan OGRA announces its price every month.
He said that the government is making every possible effort to meet the energy demand during winter. He says, "If we have to buy expensive fuel to maintain the supply of gas through the pipeline, we will buy that too. At the same time, we will try to use LNG (liquified natural gas) to meet the demand for December, January and February."
According to him, as per the instructions of the Prime Minister, efforts are also being made to ensure that domestic consumers get gas for cooking at least three times a day. However, according to Ali Parvez Malik, for those who do not have a pipeline gas connection, LPG is the second biggest option of fuel.
According to Ali Parvez Malik, the government wants to bring the LPG business within the ambit of regulations. He says, “Such a system is being brought in so that the cheapest fuel can be imported and made available to the people at a lower price.”
He said that to maintain gas supply and control prices, four government agencies have been ordered to import LPG again. These entities include Pakistan State Oil, Parco LPG, Pakistan LNG Limited and Sui Southern Gas LPG. According to the Energy Minister, these institutions have also received proposals to import LPG. If imported LPG is included in the supply, its price could be around Rs 450 per kg.
He said that private importers would also be allowed to buy LPG at lower prices. This will increase competition between companies and reduce prices. Under the new policy, LPG produced in the country will be sold through auction, while the quota system has been abolished. OGRA will not decide the price of domestic or imported LPG, but the price of gas produced in the country will be decided through auction. The difference between the prices of domestic and imported LPG will be deposited in a special fund. According to the Energy Minister, through this fund, LPG will be provided to needy people at low prices under the Benazir Income Support Programme.
People associated with the LPG business believe that there is little hope of the new policy reducing prices immediately. Not only this, the prices may also increase further. "We will not support any policy that will make gas more expensive for consumers," says Irfan Khokhar, president of the Pakistan LPG Industries Association.
Talking to BBC, he said that the government's new policy will make gas expensive, because its prices are already increasing in the international market. Irfan Khokhar says that if the government reduces or eliminates the tax and terminal charges on LPG import, the prices can come down immediately. He demanded the government to ensure fair pricing of gas and conduct a "judicial inquiry" against profiteers.
He says that importers buy expensive LPG from abroad and are not able to sell it at the OGRA fixed price due to various taxes and other expenses. He says, "The local mafia has earned billions of rupees by selling the gas available in the country at a fixed price at the price of imported gas." According to Irfan Khokhar, if this entire matter is investigated impartially, then the people responsible for earning more profits can be identified.
