LPG Auction Results Are Being Held Back, and Cylinders May Rise 15%

An LPG auction was held on 10 August. A week later the results have still not been released, and if they eventually are, cylinder prices could rise by around 15 per cent.

Before that number does any work on you: nothing has been decided. The reason the results are sitting unreleased is the interesting part.

Where this actually stands

Existing LPG stakeholders have gone to court arguing the bidding process breaches current policies and rules. Until that is resolved, the Petroleum Division is holding the outcome.

The knot at the centre of it

A signature bonus is what a winning bidder pays for the right to a supply lot. Rs 205 million, in this case, over three years. Somebody has to bear it.

Here is the difficulty, and it is not our inference, it is in the reporting.

Ministerial direction was that the burden should not be passed to consumers. Reasonable enough as an instruction.

But existing producer licences prohibit charging premiums above notified prices. So a producer cannot lawfully add it to what they charge either.

Which leaves the money with nowhere to go. Officials accept the government cannot legally collect the projected sums as things stand, without changing the policy first.

That is why nothing has been published. It is not administrative slowness. It is a rule that does not currently permit the outcome the auction was designed to produce.

What the 15 per cent actually depends on

The figure is a conditional, and the conditions are not small.

It assumes the court challenges resolve in a way that lets the results stand. It assumes the results are released. It assumes the policy is amended so the cost can be recovered. And it assumes producers pass the whole of it through rather than absorbing part.

Any one of those failing changes the number or removes it entirely. We are not forecasting a 15 per cent rise. We are telling you what has been reported as the consequence if every step lands one particular way.

What we can tell you is today's actual position, which is on our LPG cylinder price page, including how OGRA's notified rate differs from what you are charged at a shop.

What to watch, in order

1. The court challenges. Nothing moves until these are resolved.
2. Whether the results are released at all. They may be set aside.
3. Whether the policy is amended to allow the cost to be recovered.
4. What OGRA does to the benchmark price. The regulator sets that, not the producers.
5. Only then does anything reach a cylinder.

If you see a headline announcing an LPG increase before step three has happened, it is describing a proposal rather than a price.

Why this lands harder than it looks

LPG is not a secondary fuel in Pakistan. It is the cooking fuel wherever piped gas does not reach, which is most of rural Balochistan and much of Khyber Pakhtunkhwa.

It is also what households fall back on when piped supply fails. That is not hypothetical this month: supply to Quetta and six other areas has been out since 12 August after pipeline damage in Kachhi, which we have been following in the Balochistan gas outage.

So a 15 per cent move would land first on people who have no piped alternative, and second on people whose piped supply has just failed. Those are the same households in many cases.

The wider comparison between piped gas and cylinders, and when each is cheaper, is in piped gas versus LPG.

What we are not saying

We are not saying the auction was mishandled. Stakeholders have gone to court and a court will decide that.

We are not naming the companies that filed, because the reporting does not identify them.

We are not publishing a projected cylinder price. That would need us to assume both a full pass through and a benchmark that has not moved, and a specific rupee figure invented on those assumptions is exactly what people would plan a household budget around.

And we are not predicting when this resolves. A withheld result during live litigation has no reliable timetable.

Questions readers are asking

Is LPG going up 15 per cent?

No decision has been taken. Fifteen per cent is what has been reported as the possible rise if auction costs are passed to consumers, which several unresolved steps stand in front of.

Why are the auction results being held back?

Existing LPG stakeholders have filed court cases arguing the bidding process violates current policies and rules.

What is a signature bonus?

The amount a winning bidder pays for the right to a supply lot. Here it was Rs 205 million for a three year lot.

Who ran the auction?

Four public sector entities simultaneously: OGDCL, PPL, Parco and GHPL, with the process directed by the Petroleum Minister.

Can producers just add it to the price?

Not as things stand. Producer licences prohibit charging above notified prices, which is the reason the outcome is stuck.

When will we know?

There is no timetable. The court cases come first, then a decision on releasing the results.

What is the price today?

Our LPG cylinder page carries the current rate and explains why the shop price differs from OGRA's notified one.