Govt plans new LPG pricing formula from November 1, industry warns of up to 25% hike

The government plans to revise the pricing mechanism for liquefied petroleum gas (LPG) from November 1, 2026, linking domestic producers' prices to Pakistan State Oil's (PSO) landed import cost instead of the Saudi Aramco Contract Price (SACP), The News reported. 

Federal Minister for Petroleum Ali Pervaiz Malik conveyed the proposed change to industry representatives during a meeting on Tuesday, according to stakeholders familiar with the discussions.

Under the proposed formula, the maximum price charged by local LPG producers would be determined by the landed cost of PSO's imported cargo, replacing the existing ceiling linked to Saudi Aramco's contract price.

Industry representatives estimate that the change could allow domestic producers to raise prices by as much as 40%, potentially pushing retail LPG prices up by 20–25%.

Locally produced LPG accounts for approximately 35% of Pakistan's supply, while imports meet the remaining 65%.

During the meeting, industry stakeholders raised concerns about the legality of the proposed mechanism and its potential impact on competition and consumers.

They argued that linking domestic prices to a single state-owned company's import costs could expose the market to price volatility, particularly if imported cargoes were procured at higher rates.

Participants also questioned how the proposed benchmark would account for private importers capable of purchasing LPG at prices below PSO's landed cost.

Industry representatives instead advocated complete deregulation of LPG pricing, allowing market competition and negotiations between buyers and sellers to determine prices.

They also raised concerns about potential over-invoicing of imported LPG, referring to earlier allegations involving imports by Sui Southern Gas Company.

The proposed pricing change has yet to be formally confirmed by the petroleum minister, who was unavailable for comment when approached.