News Analysis |
A Liquefied Petroleum Gas crisis is looming above as LPG importers on 10th January warned to suspend import of LPG from next month in case government refused to withdraw regulatory duty and advance tax
In an assemblage with Petroleum Division officials, LPG importers demanded that the government withdraw the regulatory duty on imported LPG and 5.5 percent advance tax for smooth supply of the commodity to meet the local demand.
Following directives of Prime Minister Shahid Khaqan Abbasi earlier this month, a meeting was held in the Petroleum Division to address the concerns of importers in Islamabad. The meeting was attended by high officials of the Ministry of Energy (Petroleum Division), local producers of LPG and its importers.
The court gave the verdict in favour of Pakistan last year as well as ordered the petitioners to pay the country $12 million (Rs. 1.3 billion) in legal expenses. Pakistan government paid Rs. 2.25 billion to a UK-based law firm to win the case, which was almost equal to the value of Progas assets.
It is pertinent to mention here that at present there is no advance tax on locally produced LPG but the government had imposed a petroleum levy on locally produced LPG. However, the government also imposed regulatory duty on LPG imports equal to petroleum levy on locally produced LPG, which had resulted in widening price difference making imports unfeasible.
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During the meeting, it was discussed that the imposition of regulatory duty on imported LPG had actually led to the killing of the spirit of LPG policy approved by the present government to bridge the price difference between local and imported LPG. It was further informed that the purpose of imposition of petroleum levy on locally produced LPG was to bridge the price difference between local and imported LPG.
But the government had also imposed regulatory duty on imported LPG at the same time, which also led to widening gap between the prices of local and imported LPG making the imports unfeasible. Importers demanded to withdraw regulatory duty on imported LPG and 5.5 percent advance tax for smooth supply of imports to meet the local demand. At present, there is no advance tax on locally produced LPG.
However, Progas shareholders filed a case in the International Centre for Settlement of Investment Disputes, blaming Pakistan government’s intervention in the market for their business failure.
Briefing the press after the meeting along with importers of LPG, the Chairman All Pakistan LPG Distributors Association Irfan Khokhar said that imports of LPG would be suspended from February 1st, 2018, if the government does not withdraw regulatory duty and advance tax on LPG imports.
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He said that there was a price difference of Rs. 15 per kg between locally and imported LPG which had created monopoly of local LPG producers. In this way, he said that local producers were minting Rs. 30 million daily from the consumers. He informed that local LPG producers had created monopoly on LPG quotas and there were 146 LPG marketing companies but only 30 companies had local LPG quota.
He said that Pak Arab Refinery (Parco) was involved in allocating LPG quota to them without inviting bids, which was in violation of PPRA rules. He further said that during the meeting, officials of petroleum division had assured to conduct inquiry. In retrospect, to dampen the incoming LPG blow, the state had challenged the acquisition of assets of Progas Pakistan Limited, a fully integrated liquefied petroleum gas (LPG) company, worth Rs. 2.3 billion. The government has spent over Rs. 2 billion to win a case in an international court.
Briefing the press after the meeting along with importers of LPG, the Chairman All Pakistan LPG Distributors Association Irfan Khokhar said that imports of LPG would be suspended from February 1st, 2018,
However, the court, while announcing its ruling, ordered petitioners to pay Pakistan $12 million (Rs. 1.3 billion) in legal expenses, meaning the government had to eventually pay less than Rs. 1 billion. State-owned public utility Sui Southern Gas Company (SSGC) had bought assets of Progas in an auction conducted by banks at a price of Rs. 2.3 billion during the 2008-13 tenure of the Pakistan Peoples Party (PPP)-led government.
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However, Progas shareholders filed a case in the International Centre for Settlement of Investment Disputes, blaming Pakistan government’s intervention in the market for their business failure. They invoked the Bilateral Investment Treaty and made damages claims of $573 million against Pakistan. The court gave the verdict in favour of Pakistan last year as well as ordered the petitioners to pay the country $12 million (Rs. 1.3 billion) in legal expenses.
Pakistan government paid Rs. 2.25 billion to a UK-based law firm to win the case, which was almost equal to the value of Progas assets.