The Oil & Gas Regulatory Authority (OGRA) of Pakistan has introduced a price ceiling on Liquefied Petroleum Gas (LPG) by capping it at PKR 910 per 11.8 kg domestic cylinder. According to one news item (Express Tribune, 3 March), LPG marketing companies have protested against this intervention and termed it a move that will lead to
shortages, promotion of black market activities, overcharging, and social unrest.
The industry is of the view that
this move “would kill the industry and make its business financially unviable.”
Economics 101 lays out the harmful effects of price controls – sooner or later these measures may negatively impact
the economy, whereas in the short term such a policy may be perceived positively by consumers. LPG has remained a
deregulated sector, which has increased its consumption as well as investment.
According to the Economic Survey of Pakistan (2015-16), as of February 2016 this sector has received about PKR 22.33 billion in investment in marketing, storage and filling and more investment is expected in the construction of auto refueling stations. The investors also anticipate a stable policy, and a sudden change in price policy can act as a
deterrent. Thus the recent move of OGRA to introduce a price ceiling is uncalled for and the previous policy of no intervention in this competitive market should be restored while making sure that there is a level playing field.
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