The decision comes after Saudi Aramco significantly reduced the prices of propane and butane, which Islamabad imports for local consumption. The revised price for a kilogram of LPG in June will be Rs197, down from Rs243/kg in May 2023. LPG is widely used in Pakistan for cooking purposes in areas where piped natural gas is not available, as well as for heating, power generation, and automotive fuel. The Oil and Gas Regulatory Authority (OGRA), in a notification, said the price of 11.8kg domestic cylinder has been decreased by Rs438, while the commercial cylinder (45.4kg) has been reduced by Rs1,658 compared to the previous month. Consequently, the domestic gas cylinder weighing 11.8 kilograms will now cost Rs2,321, and the commercial cylinder (45.4kg) will be priced at Rs8,933. In the previous month, the price of domestic cylinders was Rs2,759.89, and the commercial cylinder was priced at Rs10,618.
The OGRA has calculated the producer price of LPG, considering it to be composed of 40 percent propane and 60 percent butane, at Rs127,070/ton. This price includes an excise duty of Rs85/ton, while excluding the petroleum levy of Rs4,669/ton, resulting in Rs55.09 for an 11.8kg cylinder and bringing the total cost of the cylinder to Rs1,554.52. Prior to the imposition of an 18 percent general sales tax (GST), the producer price would be Rs131,739/ton, while the price of an 11.8kg cylinder is Rs1,554.52 per cylinder. Additionally, GST of 18 percent on 131,739/ton would be Rs23,713/ton or Rs279.8 per 11.8kg cylinder.
Furthermore, the OGRA has determined a producer price of Rs1,834.3/11.8kg cylinder under this calculation. The marketing/distribution/transportation margin has been set at Rs35,000 per ton, consisting of a marketing margin of Rs17,000/ton, distribution margin of Rs10,000/ton, and transportation margin of Rs8,000/ton, which totals to Rs413 per cylinder. It is worth noting that consumers face double taxation in the current LPG price structure, paying taxes both at the producer price and the consumer prices (tax on marketing and distribution). Ultimately, these taxes result in higher LPG prices for consumers. In this calculation, the producer prices of LPG are subjected to an 18 percent GST, amounting to Rs23,713/ton or Rs280/cylinder. Additionally, consumers are taxed with an 18 percent GST of Rs6,300/ton or Rs74.34 per 11.8kg cylinder on the marketing/distribution margin of Rs35,000 per ton.