Prime Minister Shehbaz Sharif has set up an eight-member ministerial committee to examine an overhaul of Pakistan’s liquefied petroleum gas (LPG) policy, as households pay far more for cooking gas than the official rate. A standard 11.57-kilogram cylinder now sells for Rs6,000 to Rs7,200, against the Oil and Gas Regulatory Authority’s notified price of Rs3,296. The committee has one month to report to the prime minister. The review follows protests by LPG marketing companies and dealers, who objected to the policy being finalised without consultation.
At the heart of the reform is a shift in who controls LPG imports and prices. State-owned enterprises would take over both functions from OGRA, and the prices they set would then be passed on to private sector participants. Supporters say this would bring more supply and more predictable pricing. Industry stakeholders warn, however, that state-owned enterprises have limited experience in LPG imports, and that a proposed levy on locally produced LPG could push prices higher. They want a greater role for the private sector.
New Fund Proposed to Subsidize LPG Consumers
A key element of the proposal is a Producer Price Differential Fund, to cushion vulnerable consumers. Refineries and other producers would deposit the difference between local and imported LPG prices into a dedicated Public Account, audited by the Auditor General of Pakistan. The federal government would then use the fund for targeted subsidies to vulnerable consumers, with eligibility assessed through the Benazir Income Support Programme scorecard.
The proposal also reserves a share of locally produced LPG for the hardest-to-serve regions. Ten percent of local production would go to state-owned marketers at producer prices, to supply Gilgit-Baltistan, the northern areas and other remote regions through cylinders and existing air-mix plants. The remaining ninety percent would go to prequalified bottlers through transparent monthly auctions, with a floor price set at five percent of Pakistan State Oil’s import parity price.
LPG Import and Pricing Reforms Under Review
The committee is headed by the petroleum minister and includes the ministers for economic affairs and information, the prime minister’s adviser on interprovincial coordination, the special assistant on energy, the petroleum secretary, the director general of liquefied gases and the head of the Government Relations Unit. It will also review cylinder standards and the local LPG model. Cylinder safety is a persistent concern, with substandard cylinders linked to accidents.
LPG Prices Rise Above OGRA’s Notified Rate
The urgency of the review is clear from the gap between the official price and what consumers pay. Market rates of Rs6,000 to Rs7,200 are roughly double OGRA’s notified Rs3,296, and the gap has widened as supplies tightened. Operations at the Iran border were suspended earlier this month, and imports by sea have also declined. The reforms propose a new mechanism under which state-owned enterprises, including Pakistan State Oil, the Sui companies, Pak-Arab Refinery Company and Pakistan LNG, would lead the move to import parity pricing.
SOEs May Take Over LPG Import Pricing
A cabinet summary proposes keeping monthly LPG pricing while removing OGRA’s role in issuing price notifications for locally produced and imported LPG. State-owned enterprises would instead import LPG in bulk and set monthly prices based on Saudi Aramco’s free-on-board rates, plus the actual premiums, freight, insurance, incidental expenses and import taxes incurred during the previous month. The summary also proposes exempting bidders’ financial offers from publication on the Public Procurement Regulatory Authority website, citing urgency.
Proposed LPG Pricing Linked to Saudi Aramco Rates
The framework would also keep monthly producer pricing for locally produced LPG, linked to Saudi Aramco’s current-month contract price on a free-on-board basis, with adjustments based on the propane-butane ratio. Local producers would receive that Saudi-linked price, while the difference between it and Pakistan State Oil’s base price would go into the dedicated fund to subsidise lower-income consumers through the Benazir Income Support Programme. The private sector objects to the Saudi-linked formula, arguing that most of Pakistan’s LPG imports come from Iran and Oman, so a Saudi benchmark may not reflect the fuel’s real cost.
LPG Company Margins Proposed to Increase
The final piece of the package concerns the margins of LPG marketing and importing companies, proposed to rise to a minimum of Rs50,000 per tonne from Rs35,000 per tonne. The increase is presented as an inflation adjustment to margins unchanged since the 2016 LPG policy, after a decade of rising costs. The Competition Commission of Pakistan and OGRA would police collusion, with margins still subject to competition.
The next month will therefore be decisive. The committee must balance the government’s desire for a more orderly, transparent and import-linked system against industry warnings about state inexperience and higher costs, and against the reality that households already pay up to Rs7,200 for a cylinder officially priced at Rs3,296. If it increases supply, protects vulnerable consumers through the proposed fund, and gives the private sector a meaningful role, it could ease a heavy burden on family budgets. If it cannot, the gap between the notified price and the market price will remain what matters most to ordinary Pakistanis.
