How LPG Pundits work out plan to trap country
Aftab Ahmed
Islamabad: Let’s see how policymakers in the PTI government and LPG pundits plan to trap the country into LPG importers to put a burden on foreign exchange and create a monopoly of LPG importers.
There have been two plans formulated by Petroleum Division to create a level playing field to convince Prime Minister Imran Khan to give more incentives for LPG importers.
The PML-N government had formulated a single plan that imposition of Petroleum Levy (PL) on locally produced LPG to equalize price with imported LPG.
However, it may be interesting that for LPG importers who are already paying low taxes, the government has worked out a plan now to cut more taxes and concessions on profits to the LPG importers.
The plan submitted by Petroleum Division to Economic Coordination Committee (ECC) which formed a sub-body to work on it. Petroleum Division had proposed a reduction in the upfront tax from the existing 5.5% to zero and 2% on imported LPG.
These LPG pundits also involved in another plan. According to insiders, the second plan was to create a shortage of locally produced LPG for the level playing field to convince the economic managers for approving incentives for LPG imports.
Under this plan, the LPG extraction agreement between SSGCL and JJVL was canceled despite the fact that the utility had no alternate plan of extracting LPG. This resulted in taking 300 metric tons of LPG out of the system. So, this gap would be filled by LPG importers to make more money.
If the government places more cuts in taxes for LPG importers, it would go into the pocket of LPG importers as PL on locally imported LPG is already in place to fill the gap between local and imported LPG, one insider said.
Policymakers in the PTI government are pushing the country towards a monopoly of LPG importers.
The LPG marketers have also pointed out monopoly being created by pundits in government and LPG importers and they say that further cut in taxes would and distributors have hit back at the government for a further cut in taxes for LPG importers fearing that it would create a monopoly of LPG importers over the locally produced product and put a burden on foreign reserves at a time when the government is seeking rescheduled in loans due to virus lockdowns.
The Petroleum Division had moved a summary to the economic coordination committee proposing several incentives for the LPG importers at cost of locally produced LPG.
LPG Marketers Association has pointed out several discrepancies in taxation and duties on locally produced LPG and imported LPG.
Local LPG production is subject to 17% GST and a Petroleum Levy of Rs. 4,669 per MT, whereas imports enjoy a lower rate of 10% GST and are exempt from a Regulatory Duty. Locally produced LPG is already at a price disadvantage as compared to the imported products.
It has now been brought to our attention that there is a proposal to further reduce the GST as well as income tax on imports, and eliminate the tax on the profit earned on imported LPG altogether. These measures will further widen the price differential between imported and local LPG, cause an immense revenue loss to the national exchequer and disincentivize investment in setting up of LPG extraction facilities in the country, LPG marketers Association said in comments submitted to Petroleum Division.
The discrepancy in taxation and levies has also been highlighted by the Competition Commission of Pakistan in its recently published report on the LPG sector according to which the advantage provided to importers distorts the price in their favor by allowing them to sell the product at a higher price to match that of the locally produced LPG since there is no distinction between imported and local product once it is filled in a cylinder.
As an association representing the interests of all LPG Marketing Companies, we are at a complete loss to understand the rationale and justification for providing an advantage to the imported product over indigenously produced LPG.
Any incentives provided to imported over locally produced LPG will be against the spirit of competitive practices and provide an unfair advantage to imports over local production, Association said and recommend that if the aim is to lower the price of LPG for the common man, then a level playing field should be afforded to both local and imported LPG and any taxes and levies are applied at a uniform rate.
Muhammad Shoaib Hassan Vice Chairman All Pakistan Distributors Association in a letter sent to Petroleum Division said that as per the current LPG market supply and demand scenario the locally produced indigenous LPG product from 13 LPG producers are fulfilling LPG demand up to 60 percentages whereas the share of imported LPG is almost 40 percent in Pakistan market.
It is also requested that the sales tax rate on local LPG should be also 10% as it’s a poor men’s fuel. It is worth mentioning that all the imported LPG from Persian Gulf countries imported into Pakistan on minus 50 to 60 USD from the Saudi Aramco base price. He pledged to extend support to OGRA regarding registration of LPG Distributors of LPG Marketing Companies, he added.
