Govt Unveils New LPG Policy, Ends Quota System and Orders State Firms to Import LPG

The federal government has unveiled a new LPG policy that scraps the old quota system, orders four state-owned companies to import liquefied petroleum gas in bulk and promises transparent auctions of local supply, after shortages pushed cylinder gas prices to as high as Rs700 to Rs800 per kilogram in parts of the country.

Petroleum Minister Ali Pervaiz Malik announced the measures at a press conference in Islamabad alongside Information Minister Attaullah Tarar, who confirmed that the federal cabinet has approved the new LPG measures.

LPG Policy: What the Government Has Decided

According to the petroleum minister, Pakistan State Oil (PSO), Sui Southern Gas Company, Pakistan LNG Limited and PARCO have been directed to arrange bulk LPG imports through government-to-government and business-to-business deals. Private companies will also be encouraged to import, so that more suppliers compete on price.

• Quota system abolished: locally produced LPG will no longer be handed out through discretionary quotas. It will be sold through open auctions in lots of five to ten tonnes, and the results will be made public.
• Cost disclosure: importing companies will publish their monthly procurement costs on their websites, including the Saudi Aramco contract price, premiums and freight charges.
• Remote areas protected: 10 percent of local LPG output is reserved for hard-to-reach areas such as Gilgit-Baltistan and other northern regions, to be distributed by state-owned companies in consultation with provinces.
• Relief funds: extra revenue from the new pricing and auction system will go into a Price Stabilisation Fund and a Vulnerable Protection Fund to provide subsidised LPG to deserving households, with relief linked to the BISP database.
• Anti-cartel checks: the Competition Commission of Pakistan has been told to prevent market manipulation, while OGRA will tighten transparency in licensing. Cylinders and LPG vehicles will be monitored through a track-and-trace system.

Why LPG Prices Shot Up

The minister said the closure of crossings on the Iranian border disrupted a major supply route. Nearly half of the country’s LPG previously arrived from the western border, and the shortage allowed some market players to charge Rs700 to Rs800 per kilogram, far above an import-based price that he estimated at around Rs450 to Rs500 per kilogram after premiums and other costs.

How the New LPG Policy Affects You

More than 25 million households in Pakistan, especially in areas without piped gas, rely on LPG and other alternative fuels, while new piped gas connections have been restricted since December 2021. For these families, the new LPG policy matters most in winter, when demand for cooking and heating rises sharply.

If more importers enter the market and auction results are published, the government expects the gap between the import cost and the shop price to narrow. Low-income families registered with BISP are expected to receive targeted relief, although the subsidised rate is yet to be set by the Prime Minister.

Shift Toward Market-Based Pricing

The reforms come alongside a wider plan, sent to the cabinet earlier this week, to move LPG away from monthly OGRA price notifications toward an import-parity model, where state-owned importers announce a monthly base price reflecting the actual landed cost. A dedicated fund audited by the Auditor General of Pakistan is planned to finance subsidies for vulnerable consumers. The plan also proposes a 40,000-ton LPG terminal at Port Qasim to improve storage.

Winter Gas Supply Plan

Ali Pervaiz Malik said the government will try to keep pipeline gas available to homes during breakfast, lunch and dinner hours this winter. Additional LNG may be imported if needed, and rationing could be considered if circumstances require it. He added that the Prime Minister has asked for a wider energy security framework covering storage, refineries and LPG import infrastructure.

The real test of the LPG policy will be whether cylinder prices in markets actually fall in the coming weeks as new imports arrive and the first auctions are held.

For official updates, visit the Oil and Gas Regulatory Authority (OGRA) website.

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