ISLAMABAD: A group of oil and gas explorers from Pakistan went to the government again to complain that importers of liquefied petroleum gas (LPG) are making billions of rupees because the previous Pakistan Tehreek-e-Insaf (PTI) government waived taxes on LPG.
The last government issued a Statutory Regulatory Order (SRO) that removed regulatory duty from LPG imports and cut the general sales tax (GST). With the duty cut, it is thought that the LPG importers got a windfall of about Rs20 billion.
This has not only cost the government money in lost duty and taxes, but it has also changed the LPG policy for state-run energy companies like Oil and Gas Development Company Limited (OGDCL) and Pakistan Petroleum Limited (PPL). The Pakistani government owns a lot of shares in these companies.
During the time that the last government was in power, the LPG plant at Jamshoro Joint Venture Limited (JJVL), which made up 15% of local production, was also shut down. It gave the LPG importers a chance to bring in more and make more money.
Local business people say that LPG importers are making a lot of money because the country is short on dollars and the environment is good for them.
LPG is seen as a fuel for poor people, especially those who live in remote places.
In the budget for the current fiscal year, the government, which is led by the Pakistan Muslim League-Nawaz (PML-N), has doubled the petroleum levy on locally made LPG to over Rs10,000 per tonne. This makes things even worse for fuel producers. But it hasn’t been put into place yet.
In light of the different tax rates, the people who make LPG have asked the government to fix the problem.
Industry officials said that building an LPG plant costs between $30 million and $40 million, but that the producers had stopped putting money into building new plants because the importers were getting special treatment.
They thought that the current situation would lead to more LPG imports and put more pressure on the foreign currency reserves, which were already shrinking because the government was having trouble getting money from the IMF.
In a letter to the director general of petroleum concessions (DGPC), the Pakistan Petroleum Exploration and Production Companies Association (PPEPCA) asked that LPG producers and importers be treated the same.
It wanted to get rid of the different taxes because LPG producers had to pay the petroleum levy but LPG imports didn’t have to pay the regulatory duty.
Since 2020, PPEPCA has been writing to the government, but nothing has changed. Companies are worried that neither the Ministry of Finance nor the Federal Board of Revenue has taken the steps needed to fix the difference in tax rates (FBR).
In the letter, Mazhar Farooq, Secretary General of PPEPCA, said, “Given the above, we would like to ask you again to look into the matter to fix this problem of two different taxation regimes for local and imported LPG.”