Pakistan to scrap LPG quota system and auction domestic supply, as ministers promise an end to monopoly pricing
The federal government has announced it will abolish the discretionary LPG quota system and auction domestic supplies in transparent lots, in a sweeping reform unveiled in Islamabad on Tuesday aimed at breaking a monopoly it blames for inflated cylinder prices.
The federal government has announced a sweeping overhaul of Pakistan's liquefied petroleum gas market, abolishing the long-standing discretionary quota system and replacing it with transparent auctions, in what ministers described as the first serious attempt to break the grip of a small group of suppliers on the sector.
Petroleum Minister Ali Pervaiz Malik and Information Minister Attaullah Tarar unveiled the plan at a joint press conference in Islamabad on Tuesday, 3 November. Tarar said Prime Minister Shehbaz Sharif had directed the introduction of a merit-based and transparent system, and called the move historic, arguing that no previous government had tried to dismantle the monopoly and put competition at the centre of LPG distribution.
At the heart of the reform is the end of quota-based allocation, under which a handful of players were accused of profiteering while consumers paid far above the official rate. Instead, domestic LPG production will be sold through auctions in lots of five and ten tonnes, open to companies licensed by the Oil and Gas Regulatory Authority (OGRA). The results of those auctions will be made public, and the process will be overseen by the petroleum secretary, the OGRA chairman and the boards of the companies involved.
The ministers also set out a new approach to imports. The government has directed its major state companies — Pakistan State Oil, SSGC LPG and Pakistan LNG Limited — to arrange bulk purchases through government-to-government and business-to-business agreements. Private importers will be encouraged to take part as well, and the government said it would welcome any company able to supply LPG at a lower price than the state firms, with PARCO Pearl Gas named among the potential participants.
Transparency in pricing is another pillar of the plan. Monthly details of the Saudi Aramco contract price, premiums, freight and other import costs will be published on the websites of the relevant state-owned companies. That matters because the benchmark price has climbed sharply, from 540 dollars per tonne in March to 756 dollars per tonne recently, and OGRA adjusts domestic prices in line with that benchmark — a mechanism consumers have until now had little visibility into.
Money raised above producers' free-on-board prices through the auction system will not simply be absorbed as profit. It will flow into two new funds: a Price Stabilisation Fund and a Vulnerable Protection Fund. The second of those is intended to shield low-income households, with eligibility criteria to be worked out with the Ministry of Energy, provincial governments and relevant institutions. Subject to the prime minister's approval, the government said subsidised LPG could be fixed at 300 or 400 rupees per kilogramme, or delivered through a direct subsidy of 50 rupees per kilogramme to deserving consumers, including those covered by Benazir Income Support Programme criteria.
One existing protection will survive the overhaul. The 10 per cent allocation for difficult and remote areas will continue, with state companies procuring that quota from domestic producers and identifying eligible districts in consultation with provincial chief secretaries. Officials said the aim was to ensure that households in hard-to-reach places, which have the fewest alternatives, are not left behind by a market-based system.
Enforcement is meant to back up the new structure. The Competition Commission of Pakistan will help guard against collusion and cartelisation, while OGRA will improve licensing transparency and audit storage facilities to discourage hoarding and profiteering. Importing companies will also be required to publish their prices on their websites, extending a transparency drive that has already seen OGRA begin publishing its own details online.
The reform lands against a backdrop of acute pressure on households. The government says Pakistan has around 10 million piped gas connections, while everyone else depends on LPG cylinders, and local production stands at only 2,000 to 2,500 tonnes a day. With Iranian border crossings closed and supply constrained, ministers said some sellers had charged as much as 800 rupees per kilogramme in various cities, roughly twice the official rate in the open market. Around 70 per cent of the country's fuel needs are met through imports, which leaves prices exposed to international benchmarks and to disruption at the border.
Ministers framed the LPG changes as part of a broader relief effort rather than a standalone fix. Tarar noted that the government had initially provided subsidies worth 133 billion rupees to prevent increases in petrol and diesel prices and to keep fuel available, and that oil refineries had contributed 15 billion rupees over 30 days to hold petrol prices down. On Tuesday, Malik separately promised that piped gas would be kept flowing at the three daily mealtimes through the peak winter months, even if the most expensive LNG had to be bought to do it.
What happens next will depend on implementation, and several details remain to be finalised. The subsidised price level and the exact eligibility rules still need the prime minister's approval, the auction system has yet to run its first sale, and the funds exist so far as an announced mechanism rather than a tested one. For households paying inflated cylinder prices today, the test will be simple: whether the first auctions bring more sellers into the market, whether published import costs match what they are charged, and whether the promised support for vulnerable families actually reaches them before winter demand peaks in December and January.
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