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Going liquid

LPG is on the rise — price, demand and supply, everything

Going liquid

With the winters round the corner, the prices of Liquefied Petroleum Gas (LPG) — also known as poor man’s fuel, have increased all over the country, forcing the affected people to come out on streets.

They have been protesting against what they call profiteering and black-marketing by LPG marketing companies, distributors and retailers, who they believe have intentionally created a shortage in the market. They allege that LPG companies would store the gas and sell it when its demand would increase incredibly during winters with freezing temperatures.

On the other hand, the players in the LPG industry reject these allegations and claim that all fluctuations in the prices are demand and supply driven. The correction in price is made as soon as the demand-supply gap is filled.

The explanations given by industry seem to be quite simple but the common man affected by these price distortions has a different story to tell. More and more people are becoming dependent on LPG for their energy needs. It is used at homes for cooking and heating, and as a comparatively affordable fuel in vehicles, including rickshaws.

Its demand is also on the rise as supply of piped gas is becoming a thing of the past even in accessible regions what to talk of far-flung areas and lands inaccessible due to the complexity of the terrain. Even the households who have natural gas connections use LPG at times when the pressure of the piped natural gas is too low to kindle a flame.

Zahid Hussain, a domestic consumer of LPG, who lives on the outskirts of Lahore, says he has witnessed the prices go up from Rs120 per kg to Rs200 per kg within a week. He tells TNS that retailers of LPG are doing roaring business in newly developed localities where Sui Northern Gas Pipelines Limited (SNGPL) has not yet laid pipelines. They can demand any price as they know the locals have no option. He alleges that SNGPL is also influenced by the LPG mafia which wants most parts of the land uncovered by natural gas distribution companies.

Hussain says there was a retailer in his area that was selling LPG at a lower rate but could not do so for too long. The other retailers of the area got together and threatened him with dire consequences.

The price of the LPG production and distribution is not set by Oil and Gas Regulatory Authority (Ogra) but by the LPG marketing companies that buy it from oil fields and refineries, where it is trapped during an industrial process. In fact, it is the gas found around the crude oil in the form of vapour and smoke and pressurised to convert into a liquid state. When the pressure is released slowly the liquid turns into gas and can be used as fuel.

LPG marketing companies supply gas to distribution companies who have LPG distributors and sub distributors in their network. The retailers are the last tier in this arrangement and the point of contact with the consumers.

When contacted by TNS, Farooq Iftikhar, Chief Executive of Tez Gas (Pvt) Ltd and Chairman LPG Association of Pakistan (LPGAP), rules out the possibility of hoarding and profiteering. Instead, he says, the hike in prices is only during the days when demand rises unexpectedly and LPG has to be imported to overcome the shortage.

As imported gas is costlier than the locally produced, he says, the average cost becomes higher. Those who do not have knowledge of this cry foul and level baseless allegations against marketing companies, he adds.

He says that in meetings the government had offered to import LPG and sell it to them at subsidised rates. “Had this decision been implemented, the difference in the price of local and imported gas would have been absorbed by the government and not passed on to the consumers” he says, continuing that this was quite a workable formula — as the government imports costlier fertiliser to overcome shortage and gives it at subsidised rates to farmers which are far lower than those of local fertilisers.

“But unfortunately, there was no follow up and this plan could not materialise,” he says.

Muhammad Salman, a rickshaw driver hailing from Kasur district, is a direct victim of LPG price hike. He buys gas at a different rate every day and calculates the fare accordingly. Half of his day at work is spent on bargaining with passengers.

But he faces problems with his regular customers. He cannot renegotiate the rates with parents’ of the children who he drops and picks from school every day. “I am paying from my own pocket rather than earning from this assignment. I met these people with a reference and cannot quit this job before a year. Otherwise, I would have refused right away,” he says.

Ogra spokesman Afzal Bajwa confirms that the authority does not fix prices but it can act if the distributors are not selling at the price published by marketing companies. He says there have been raids where distributors were found selling the commodity at rates much higher than those announced for that day. If that happens, he adds, the authority issues notices to marketing companies who are responsible for the conduct of the distributors in their network.

Bajwa says that the government has taken notice of irregularities in this sector and has decided to put it under the scanner. Leaving it totally at the mercy of market forces seems to be an unworkable proposition.

According to him, Ogra can keep a check on the process involved in producing, handling and marketing of gas. For example, the authority takes notice of decanting activity (shifting of gas from standardised cylinders to smaller ones) and may ask the police and district administrations to take notice of such violations.

He says decanting is going all over the country while providing the gas to rickshaw owners as none of them can install 12kg LPG cylinder in their rickshaw. To facilitate rickshaw drivers and owners, Ogra has so far issued around 10 licenses for installation of LPG filling stations, he says.

An LPG seller in Northen Lahore tells TNS on condition of anonymity that the end price is higher also for the reason that they have to grease the palm of district administration and police staff who keep on hounding them. He says these officials can shut down their businesses any time as they cannot survive without going for decanting. “Most of our customers are buyers of 1 kg to 2 kgs of LPG and cannot buy or carry the huge 12 kg standardised cylinders. We bribe to remain in the market and pass on this cost to the customers,” he concludes.

Shahzada Irfan Ahmed

shahzada irfan
The author is a staff reporter and can be reached at [email protected]

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