LPG industry in pakistan

LPG Industry in Pakistan:

LPG stands for “Liquefied Petroleum Gas”. LPG Industry in Pakistan is an unoriginal of two large energy industries, the processing of natural gas liquids and the refining of crude oil.

Propane and Butane are chemically quite similar but the difference in their properties means that they are particularly suited to specific uses.

LPG commonly is used as fuel for gas barbecue grills and gas cooktops and ovens, for gas fireplaces, and in portable heaters.

In Europe, LPG water heaters are common. It is also used as an engine fuel and for backup generators.

Liquefied Petroleum Gas (LPG) is a portable, clean and efficient energy source which is readily available to consumers around the world.

LPG is a co-product of natural gas and crude oil production; its unique properties make it a versatile energy source which can be used in more than 1,000 different applications.

LPG is produced during oil refining or is extracted during the natural gas production process. If you release LPG, gas is emitted.

LPG exports by country:

It can then be stored and transported in LPG cylinders. Natural gas is extracted from deep within the earth and can contain ethane, propane, butane and pentane.

LPG at impressive pressure and temperature is a gas which is 1.5 to 2.0 times heavier than air. It is readily liquefied under moderate pressures.

The density of the liquid is approximately half that of water and ranges from 0.525 to 0.580, 15 deg. C. Water boils at 100°C or 212°F, becoming a gas (steam).

In contrast, LPG (propane) gas boiling point temperature is -42°C or -44°F, becoming gas vapor. LPG stays liquid because it is under pressure in a gas cylinder.

LPG vapors can run for long distances along the ground and can collect in drains or basements. When the gas meets a source of ignition it can burn or explode.

Cylinders can explode if involved in a fire. LPG can cause cold burns to the skin and it can act as an asphyxiate at high concentrations.

The liquefied petroleum gas (LPG) marketers and distributors have hit back at the government for granting further cut in taxes to LPG importers fearing that it would lead to a monopoly of imported LPG over the locally produced product.

LPG Industry in Pakistan:

In this regard, the Petroleum Division had moved a summary to the Economic Coordination Committee (ECC) proposing several incentives for LPG importers at the cost of locally produced LPG.

In a statement, the All Pakistan LPG Distributors Association and Pakistan LPG Marketers Association jointly said that the government’s decision would place a burden on foreign reserves at a time when the country is seeking rescheduling of loans due to virus-fuelled lockdown.

In its comments submitted to the Petroleum Division, LPG Marketers Association pointed out several discrepancies in taxation and duties on locally produced LPG and imported LPG.

Oil barrel imports by country:

Local LPG production is subject to 17% sales tax followed by an additional petroleum levy of Rs4, 669 per ton whereas imported LPG enjoys a concession rate of 10% on sales tax coupled with complete exemption from regulatory duty.

It expressed concern that the locally produced LPG is already at a price disadvantage compared to the imported product.

“It has now been brought to our attention that there is a proposal to further reduce the sales tax as well as the income tax on imports and eliminate tax on profit earned on imported LPG altogether,” the association said.

“These measures will further widen the price differential between imported and local LPG and cause a substantial revenue loss to the national exchequer.”

He further said that such a move would dis-incentivize investment for establishment of LPG extraction facilities in the country.

The discrepancy in taxation has also been highlighted by the Competition Commission of Pakistan in a report.

Petroleum Division spokesperson said the government has allowed local LPG producers to sell their LPG at international price, which is equal to Saudi Aramco CP.

However, importer has to purchase LPG on the same price from international market, importer then brings this volume (which is 40% total supplies of the country) while incurring additional cost like; marine freight, port charges, incidental etc.

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Top LPG marketing companies in Pakistan:

In September 2020, ECC reduced GST from 17% to 10% and waived off regulatory duty on LPG imports so that there could be a level playing field, he added.

He said that the government will try to take necessary measures for adequate supplies at reasonable prices and supplies in remote areas by making imports competitive with local one and enhancing local production.

Pakistan LPG Marketers Association (PLPGMA) has appealed the federal government to end the discriminatory taxes and petroleum levy (PL) on LPG produced in Pakistan.

“Domestically produced LPG is subject to 17% GST and petroleum levy of Rs. 4,669 per metric ton, whereas imported LPG is subject to only 10% GST and is exempted from petroleum levy/regulatory duty,” said Farooq Iftikhar, chairman of PLPGMA while addressing a press conference at Lahore Chamber of Commerce and Industry in Tuesday.

“LPG is a poor man’s fuel and is used by people living in rural and far flung areas of Pakistan that do not have access to Sui gas.

It is used by people with meager incomes who want to cook with a clean fuel and not use wood or biomass,” he said.

Approximately 70% of Pakistan’s LPG requirements are met through indigenous LPG production from refineries and gas fields whereas the remaining 30% is imported.

The price for indigenous production is indexed to the highest international price benchmark of Saudi Aramco Contract Price, whereas most of the LPG imported to Pakistan is available at a discount to Saudi Aramco CP.

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