Punjab opposes LPG policy incentives

Islamabad:

The Punjab government has raised questions about the proposed incentives in the Pakistan LPG Policy 2024, which could have an impact on its revenue share.

Sources told The Express Tribune that a report had been sought from the federal government on the financial impact associated with the collection of taxes on LPG in the wake of the incentives proposed in the LPG Policy 2024.

The Shehbaz Sharif led government has re-energized to introduce the new LPG policy. Earlier, the Pakistan Democratic Movement (PDM)-led government started work on introducing amendments to the LPG policy in a bid to remove the disparity in taxes on imported and locally produced gas.

However, the issue was brought to the fore during the tenure of the caretaker government, where no progress was seen.

Now, the government has revisited the issue and the chief minister has directed the Petroleum Directorate to expedite the work, in collaboration with the Federal Board of Revenue (FBR) and the Finance Directorate, and finalize the policy for presentation to the inter-provincial forum – the Commons Council Interests (CCI).

Approval of the LPG policy has been pending since the PDM government was in power.

The Punjab Power Department has asked the Petroleum Department to share the financial implications for Punjab’s current share of federal tax collections with reference to the proposed fiscal measures, incentives and concessions outlined in clauses 17 and 26 of its draft LPG policy Pakistan 2024.

He also asked what would be the economic impact on Punjab when LPG royalties are paid by producers on the basis of realized market value, as per the decision of the CCI in its 43rd session.

Earlier, the Directorate of Petroleum proposed a plan, which sought government intervention in the allocation of LPG supplies to Sui companies without any bidding process under the new LPG Policy 2024.

But natural gas producers opposed it, fearing it would lead to anti-competitive practices and kill the spirit of deregulation.

In the LPG Policy 2024, the Petroleum Directorate has proposed that all LPG producers will dedicate up to 10% of their production to Sui gas companies and marketing companies for exclusive consumption at LPG air blend plants.

These units have been developed and operated by Sui companies to provide power to remote and hilly areas where piped natural gas is not available.

The Petroleum Department has proposed that an additional 5% of LPG production will be earmarked for marketing companies for exclusive supplies in Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan.

These exclusive volumes (15%) will be offered without following the bidding process and at a weighted average LPG price. The Oil and Gas Regulatory Authority (Ogra) will ensure compliance with the proposals.

However, LPG producers have objected to the allocation of 15% of production to Sui gas and trading companies without any bidding process, calling it “anti-competitive”.

Apart from being anti-competitive, they pointed out, the preferential allocation of LPG at percentage rates was also against the spirit of the deregulation regime.

Under the new policy, LPG producers can sell part or all of their remaining production (excluding exclusive sales of 15%) to their marketing subsidiaries under long-term contracts, provided that these subsidiaries market and distribute the entire volume themselves or through their network of distributors without reselling to any other marketing company or its distributor.

In the draft, it was revealed that LPG producers would follow a monthly, quarterly or annual competitive bidding process to make available and sell their product to the trading companies holding a valid Ogra license and meeting the pre-selection criteria, at a competitive market price. under the liberalized pricing regime.