Prime Minister Shehbaz Sharif has rejected a proposal to auction liquefied petroleum gas (LPG) produced by state-owned companies, directing the government to establish a comprehensive policy and legal framework before introducing the new system.
The proposed arrangement could have increased LPG prices by at least 15 percent, adding around Rs. 900 to the cost of an 11.8-kilogram domestic cylinder.
The prime minister refused to approve interim measures proposed by the Petroleum Division, effectively halting the results of simultaneous auctions conducted by three major public-sector LPG producers on August 10.
Under the proposed system, the price of locally produced LPG would have been linked to import parity, potentially increasing the margins available to marketing companies and distributors. The estimated additional cost was Rs. 77,000 per tonne, equivalent to around Rs. 900 per domestic cylinder.
The decision comes as consumers face steep LPG prices amid supply constraints. An 11.8-kilogram cylinder is currently selling for around Rs. 5,000, significantly above the Oil and Gas Regulatory Authority’s notified maximum price of Rs. 3,296.
Industry officials have linked the shortage partly to restricted supplies through the Taftan border and delays in clearing more than 25,000 tonnes of LPG accumulated at Rahimdan, near Gwadar. Waiting times at the Gwadar terminal have reportedly reached around a month, while freight costs have climbed from $100 to $400 per tonne.
Imports have also been affected by the closure of the Strait of Hormuz, making Oman an important alternative source of supply. According to correspondence cited by Dawn, the Foreign Office contacted Oman’s state-owned OQ Trading at the Petroleum Division’s request to arrange LPG cargoes. However, sources said the available volumes were subsequently committed to a single private buyer.
Meanwhile, both LPG terminals at Port Qasim were reportedly operating at full storage capacity, raising questions about the extent of supply shortages and the effectiveness of market oversight. Industry sources also pointed to weak enforcement and delays in resolving supply bottlenecks.
The proposed auction mechanism would have required Oil and Gas Development Company Limited, Pakistan Petroleum Limited, Pak-Arab Refinery Company and Government Holdings (Private) Limited to offer standardized lots of five tonnes per day on a pilot basis. The arrangement was intended to replace the existing quota-based system.
However, the plan has also faced legal challenges from existing LPG stakeholders, who argue that current policies and rules do not authorize such auctions. The Petroleum Division and relevant state-owned entities have reportedly consulted the Attorney General for Pakistan regarding the litigation.
Pakistan’s annual LPG demand ranges from 1.4 million to 2 million tonnes, with imports accounting for more than half of the country’s total supply.
