The federal government has implemented a significant reduction in liquefied petroleum gas (LPG) prices, slashing them by 21.8 percent for July. The price of an 11.8-kilogram domestic cylinder has been reduced to Rs2,848.9, down from Rs3,643.4 in June, according to a notification issued by the Oil and Gas Regulatory Authority (OGRA).
Reasons for the Price Reduction
OGRA explained that the LPG producer price is linked to the Saudi Aramco Contract Price (CP) and the US dollar exchange rate. Compared to the previous month, the Saudi Aramco-CP decreased by 25.62 percent. Additionally, the average dollar exchange rate saw a slight decline of 0.11 percent. These factors combined resulted in a decrease of Rs794.50 per 11.8-kilogram cylinder, or 21.80 percent. The per-kilogram reduction in LPG consumer price is Rs67.30.
The new prices took effect on July 1. The regulator fixed the new consumer price at Rs241.4 per kilogram, down from Rs308.76 in June. Consequently, the 45.4-kilogram commercial cylinder also became cheaper by Rs3,663, now priced at Rs10,223.
Context of Previous Price Hikes
The July cut marks a significant shift after a period of steep increases. Since the onset of the Middle East unrest, the government had raised LPG prices by a cumulative 36.7 percent, equivalent to Rs82.9 per kilogram and Rs978 on a domestic cylinder. In April alone, prices surged by 35 percent, adding Rs924 to the domestic cylinder and Rs78.28 per kilogram in a single month—one of the steepest increases in recent memory.
Now, with the latest reduction, domestic consumers, as well as commercial and industrial users, are expected to experience notable relief. The price cut is particularly beneficial for low-income households, for whom LPG is the primary cooking fuel and who have been squeezed by broad inflation and stagnant wages.
Components of the Final Consumer Price
Embedded in the final consumer price is a petroleum levy of Rs4,669 per tonne, an 18 percent general sales tax (GST) of Rs30,528 per tonne (down sharply from Rs40,799 in June), and an additional 18 percent GST of Rs6,300 levied on marketing, distribution, and transportation margins totaling Rs35,000 per tonne.
