LPG up Rs100 a kg as border curbs hit Iranian supply

Prices of liquefied petroleum gas (LPG) in Pakistan have surged by Rs100 per kilogram over the weekend, and market stakeholders are asking the government to move from monthly to weekly or daily pricing, as it does for petroleum products, Dawn reported.

The demand came on Sunday, ahead of winter, when LPG use traditionally rises and the risk of hoarding, black marketing and artificial price rises grows, particularly in remote and hilly areas. Stakeholders say the LPG policy has not changed for more than a decade and no longer reflects the market.

Why prices jumped

Prices rose after the closure of the Rahimdad-250 border post and the withdrawal of a trade exemption. The Ministry of Commerce’s memorandums of October 16 withdrew exemptions from the electronic import form (EIF) for Iranian imports, and for shipments to Central Asian republics and Azerbaijan via Iran. More than 4,500 tonnes of LPG are reportedly stranded on the Iranian side.

Mohammad Ali Haider, vice chairman of the LPG Marketing Association, which represents more than 200 companies, said prices had risen by Rs100 per kg over the weekend and could climb further without immediate intervention.

The Quetta Chamber of Commerce and Industry separately urged traders hit by the closure of the Pakistan-Iran border at Taftan not to believe “negative propaganda”, citing assurances from the Ministry of Commerce that the closure was on “technical and temporary” grounds, The Express Tribune reported. No official notification explaining the closure or giving a timeline for reopening has been issued, according to the report.

How Pakistan gets its LPG

Pakistan consumes nearly two million tonnes of LPG a year. About 30 per cent is produced domestically and 70 per cent imported. Of 1.2 million tonnes of imports, around 250,000 tonnes arrive through Port Qasim and nearly one million tonnes through Iranian routes, including Taftan, Mand and Rahimdad-250, according to Dawn. The report said Taftan had been closed for nearly six months over security concerns, while Mand faced intermittent disruptions, increasing reliance on Rahimdad-250.

A benchmark that no longer fits

Prices are benchmarked to Saudi Aramco’s Contract Price (CP), but supplies largely come from Iran, Oman, the UAE and Iraq, including Iranian LPG allegedly routed through other sea channels. Haider said:

• Before the war, Iranian auctioned LPG reached the border at $100 to $150 per tonne below Saudi CP. War-related insurance and freight premiums have pushed costs to around $300 per tonne above CP, making the regulator’s benchmark “increasingly unrealistic”.
• Oil prices moved to daily adjustments after the war began, while LPG remained tied to monthly notifications set in advance by the Oil and Gas Regulatory Authority (Ogra). No imports were currently arriving at CP-based prices.
• State-owned firms, including SSGC, SNGPL and Pak-Arab Refinery, avoid imports at the notified rates for fear of accountability investigations.
• Freight costs through Gwadar have risen from $60 to $80 a tonne to as much as $380.

He also alleged that manipulated freight arrangements, questionable import declarations and the lack of digital tracking of tankers, transporters and distributors allowed profiteering and tax evasion.

The signature bonus dispute

Haider criticised a petroleum division directive that requires state-owned companies to auction LPG against signature bonuses, saying it favours cash-rich firms. He said a relatively obscure company had reportedly offered a Rs220 million signature bonus for a five-tonne quota, prompting allegations of money laundering and consumer exploitation. Litigation has stalled the process. Petroleum Minister Ali Pervaiz Malik and ministry spokesman Zafar Abbas did not respond to Dawn’s written queries.

What the industry wants

Haider urged the government to review the policy with stakeholders, revise the Rs35,000-per-tonne marketing margin fixed in 2016, track imports and distribution digitally, and publish daily prices on Ogra’s website. He also questioned a Rs4,690-per-tonne petroleum levy introduced in 2016 to cushion consumers against price shocks, saying it was not serving its purpose.

Why it matters

A Rs100 jump a kilogram ahead of winter, when LPG demand traditionally rises, hits households that depend on it. With imports tied up at the Iranian border and no official explanation of the closure, the pressure on prices is likely to continue until the government either restores the exemption or changes the pricing rules. Read our earlier report on the government’s plans for targeted fuel subsidies.

This article draws on reporting by Dawn and The Express Tribune.