Pakistan Moves to End OGRA's LPG Price Controls, Shift to Market-Based Pricing
The Petroleum Division has sent a proposal to the Cabinet to replace OGRA's monthly LPG price notifications with an import-parity pricing model from November 2026, while introducing targeted subsidies and a dedicated differential fund for low-income consumers.
Pakistan is set to overhaul how liquefied petroleum gas (LPG) is priced, moving away from a government-regulated maximum price toward a market-based model in which import costs determine the monthly rate, according to a proposal submitted to the federal Cabinet for final approval. The plan would end the Oil and Gas Regulatory Authority's (OGRA) monthly price notifications for both locally produced and imported LPG, with the change targeted for November 1, 2026.
Under the proposed arrangement, state-owned entities would lead bulk LPG imports and set monthly base prices tied directly to the actual cost of importing the fuel. The participating companies would include Pakistan State Oil (PSO), SSGC LPG Limited (SLL), PARCO Pearl Gas Limited (PPGL) and Pakistan LNG Limited (PLL). Their pricing formula would factor in the Saudi Aramco Contract Price, import premiums, freight, insurance, incidental expenses and applicable import taxes paid in the previous month.
The Petroleum Division argues that the current fixed-cost structure no longer reflects the economics of imported LPG. At present, OGRA sets maximum prices using the Saudi Aramco contract price on a free-on-board basis plus a fixed margin of Rs 35,000 per metric ton. That mechanism was designed for locally produced LPG but was extended to imported supplies in June 2023, which the ministry says has widened the gap between official prices and real import costs.
The division also points out that the fixed margin has remained unchanged since 2018, even as diesel prices rose by roughly 205 percent and the rupee depreciated sharply. As a result, market prices have climbed well above OGRA's notified ceiling. Average LPG prices at filling plants between January and July 2026 were reportedly Rs 60 to Rs 79 per kilogram higher than the official consumer price, peaking at a Rs 158 per kilogram gap in March, with market prices carrying premiums of 11 to 70 percent over the notified limit.
A central element of the proposed policy is the creation of a Producer-Price Differential Fund in the Public Account. The fund would collect the difference between the import-parity base price and the Saudi Aramco-linked producer price. Indigenous producers would continue to receive the Saudi-linked producer price, while the gap between that and the monthly import-parity base price would be deposited into the fund, which is intended to support targeted subsidies for low-income consumers.
The ministry contends that consumers are already paying import-reflective prices in the open market but without the protection of an enforceable regulatory framework. The shift to import-parity pricing is aimed at aligning official rates with actual market conditions while keeping financial support focused on vulnerable households.
