Pakistan turns into large LPG importer in FY 2020-21

Ibn-e-Ameer

The LPG import increased during the Financial year 2020-21 due to declining production of indigenous LPG in Pakistan, mainly due to shut down of JJVL Plant. The LPG production in Pakistan has declined due to flaws in LPG policies.

The LPG importers continue pocketing billions due to incentives the government had granted to them.

They have been importing cheaper LPG from Iran.

They are paying only 10 % general sales tax (GST) whereas the local LPG industry is paying 17 % GST. Due to this disparity, LPG importers have pocketed around Rs 25 billion at cost of the national exchequer.

Moreover, local LPG producers were paying petroleum levy on LPG whereas the government had exempted importers from regulatory duty. At present, LPG importers have a monopoly in the LPG market that had hit the local LPG industry.

State-run local LPG producers have been urging the government to end disparity in taxes to provide a level playing field.

However, bureaucracy has been misleading Prime Minister Imran Khan and the energy minister about incentives on LPG imports.

Moreover, local LPG production dropped due to the closure of JJVL. Economic Coordination Committee (ECC) had resumption of operation of JJVL to meet the demand of LPG.

However, JJVL has not been able to resume operations due to bureaucratic hurdles.

This resulted in an increase in LPG import, causing the flight of foreign exchange reserves to pay imports.

Local production catered for around 41% of demand. The country meets 907 Metric tons per day LPG through imports.

LPG accounts for about 1.5% of the total primary energy supply in the country.

During FY 2020-21, consumption of LPG was around 1.788 million tons.

Average LPG consumption during FY 2020-21 was 4,857 tons per day and FY 2019-20 it was around 3,950 tons per day, registering an increase of 23% year on a yearly basis.

Share of local production declined from 52% in FY 2019-20 to 41% in FY 2020-21.

Due to faulty policy, the share of local LPG production decreased. However, the dependence on LPG imports which have witnessed a hike from 48% in FY 2019-20 to 59% FY 2020-21.