Pakistan Replaces LPG Quota System With Open Auctions to Increase Competition

Pakistan has announced major changes to its liquefied petroleum gas (LPG) market. Under the new Pakistan LPG policy, the government will replace the existing quota-based allocation system with competitive auctions for locally produced gas.

The decision aims to increase competition, improve supplies and reduce excessive prices. The government will also encourage private imports and direct state-owned companies to purchase LPG in bulk.

Another important measure is a proposed subsidy for low-income households. Eligible families registered under the Benazir Income Support Programme (BISP) could receive LPG at Rs. 300–350 per kilogram.

These reforms come as LPG shortages and rising international prices put pressure on Pakistani households. However, consumers will want to know one thing: will the new policy actually make LPG cheaper and easier to obtain?

What Has Changed Under Pakistan’s New LPG Policy?

The biggest change is the replacement of the discretionary quota system with competitive bidding.

Previously, locally produced LPG was allocated through a system that the government said concentrated supplies among a limited number of market participants.

The new arrangement will allow eligible companies to compete for domestic LPG through open auctions.

Petroleum Minister Ali Pervaiz Malik announced the changes on November 3, 2026, alongside Information Minister Attaullah Tarar.

The government says the reforms will create a more transparent market and reduce the influence of intermediaries.

Here are the main changes:

• Local LPG producers will sell supplies through competitive auctions.
• Auction quantities will be offered in five-tonne and 10-tonne lots.
• Licensed companies will be eligible to participate.
• Auction results will be made public.
• State-owned companies will arrange bulk LPG imports.
• Private companies will remain free to import LPG.
• Eligible BISP households will receive targeted price support.

The petroleum secretary and OGRA chairman will oversee the auction process.

How Will the New LPG Auction System Work?

Under the revised arrangement, locally produced LPG will be sold through competitive bidding instead of the previous quota allocation mechanism.

Companies holding the required licences from the Oil and Gas Regulatory Authority (OGRA) will be able to participate.

Producers will offer LPG in lots of five and 10 tonnes. Interested companies will then compete to purchase these supplies.

The government expects this process to give more businesses access to locally produced LPG.

It also wants auction results to remain publicly available so that market participants can see how supplies are allocated.

However, the number of participating companies will matter.

If only a few large businesses dominate the auctions, competition could remain limited. The government will therefore need safeguards against collusion and market manipulation.

Why Is Pakistan Changing Its LPG Distribution System?

Pakistan is facing an LPG supply shortage as winter approaches.

LPG is an important cooking and heating fuel, especially for households without access to piped natural gas.

It is also widely used in areas where the gas network does not reach.

According to the petroleum minister, local LPG production stands at approximately 2,000–2,500 tonnes per day.

However, domestic production is not sufficient to meet the country’s overall requirements.

Pakistan therefore depends on imported LPG to fill the supply gap.

Recent disruptions along the western borders have affected import shipments. This has added pressure to an already tight market.

At the same time, international LPG prices have increased.

The government believes that additional imports and a more competitive domestic allocation system can help improve availability.

LPG Prices Have Reached Rs. 700–800 Per Kilogram in Some Areas

High prices are one of the main reasons behind the government’s decision.

During the November 3 press conference, the petroleum minister said some sellers were charging consumers Rs. 700–800 per kilogram.

This was significantly higher than OGRA’s notified maximum price for November.

The government also discussed an estimated price of Rs. 450–500 per kilogram after accounting for international prices and associated import costs.

The following figures provide a clearer picture:

These figures represent different pricing references. They should not be treated as prices available to every consumer.

The difference between the notified price and actual market prices also highlights the government’s challenge.

Increasing supplies will be important, but stronger enforcement will also be needed to prevent hoarding and excessive retail margins.

Four State-Owned Companies to Arrange LPG Imports

The government has directed four state-owned enterprises to re-enter or expand their participation in the LPG import business.

The companies identified in the government’s arrangements include:

• Pakistan State Oil (PSO)
• Pakistan LNG Limited (PLL)
• Sui Southern Gas LPG
• PARCO Pearl Gas

They are expected to arrange bulk LPG supplies through government-to-government and business-to-business agreements.

The objective is to secure larger shipments and improve the availability of imported gas.

The government has also indicated that it has received supply offers from countries including Saudi Arabia and Oman.

Private-sector importers will remain free to arrange their own supplies.

This is an important part of the policy because public and private suppliers will be able to compete in the market.

More competition could improve supply options and put pressure on excessive margins.

Importers Must Publish Their LPG Costs

The government also wants greater transparency in the LPG supply chain.

Importing companies will be required to publish details of their monthly procurement costs on their websites.

These details are expected to include:

• Saudi Aramco’s Contract Price.
• International market premiums.
• Freight and transportation charges.
• Other import-related expenses.
• Monthly landed costs.

The information will help buyers and regulators understand the cost of bringing LPG into Pakistan.

For example, if international prices or shipping charges increase, importers will have to disclose the relevant cost components.

This could make it easier to identify unusually high margins.

However, transparency alone will not guarantee lower prices. Regulators will also need to monitor wholesalers, distributors and retailers.

BISP Households Could Receive LPG at Rs. 300–350 Per Kilogram

Another important part of the Pakistan LPG policy is targeted financial support for low-income families.

The government plans to provide eligible BISP households with LPG at a proposed price of Rs. 300–350 per kilogram.

This measure is intended to protect vulnerable consumers from rising fuel costs.

The subsidy will be supported through a funding mechanism linked to the difference between the price of locally produced LPG and the relevant import-parity benchmark.

The government has discussed two funds:

Price Stabilisation Fund: Intended to help manage price differences and support stability in the LPG market.

Vulnerable Consumers’ Protection Fund: Intended to provide targeted assistance to eligible households.

The approach is designed to support low-income consumers without providing the same subsidy to every LPG buyer.

Will Every Household Get Subsidised LPG?

No. The proposed subsidy is intended for eligible households that meet the government’s criteria.

BISP eligibility will help identify the intended beneficiaries.

The government still needs to clarify practical details such as registration, distribution arrangements and how households will receive the subsidised supply.

Consumers should not assume that the proposed price is already available nationwide.

Remote Areas Will Continue Receiving Reserved LPG Supplies

The government has also addressed the needs of people living in remote and difficult-to-reach areas.

Under the existing policy framework, 10% of locally produced LPG is reserved for such areas.

The government says this allocation will continue.

State-owned companies will help arrange and distribute the reserved supplies in consultation with provincial authorities.

This is important because a purely commercial distribution system may not adequately serve areas with high transportation costs and limited demand.

The reserved allocation is intended to protect access for communities that depend on LPG cylinders or other local distribution arrangements.

Government Plans Action Against LPG Cartels and Hoarding

Changing the auction system will not solve every problem in the LPG market.

The government will also need to prevent companies from manipulating supplies or coordinating prices.

The Competition Commission of Pakistan has been directed to address cartelisation and anti-competitive practices.

OGRA will strengthen licensing and monitoring procedures.

The authorities will also focus on storage facilities, cylinder quality and transportation safety.

The main enforcement priorities include:

• Preventing artificial shortages.
• Taking action against hoarding.
• Monitoring excessive retail margins.
• Investigating anti-competitive agreements.
• Checking LPG storage and distribution facilities.
• Improving cylinder and transportation safety.

These measures will be particularly important during winter, when household demand increases.

Will the New LPG Policy Reduce Prices?

The government expects the reforms to improve supply and increase competition.

However, lower prices are not guaranteed immediately.

Several factors will determine the final cost of LPG.

International market prices

Pakistan imports a significant share of its LPG requirements.

When international prices increase, the cost of imported supplies also rises.

The petroleum minister said Saudi Aramco’s Contract Price had increased from $540 per tonne in March to $756 per tonne.

This increase puts pressure on domestic prices.

Transportation and import expenses

Freight, handling and international premiums also affect the final landed cost.

These expenses can change depending on shipping conditions and international supply routes.

Competition among suppliers

The auction system could help reduce excessive margins if enough companies participate.

However, limited competition could weaken the expected benefits.

Action against hoarding

Even when LPG is available nationally, consumers can face shortages if distributors withhold supplies.

Effective monitoring will therefore be essential.

The real test will be whether consumers can purchase LPG at reasonable prices from authorised retailers.

What Does the Policy Mean for Pakistani Consumers?

The reforms could affect households, importers, producers and LPG distributors.

For households, affordability and availability will remain the most important issues.

Consumers should also purchase LPG from authorised sellers and use approved cylinders.

A change in the pricing system does not remove the need for proper safety precautions.

Winter Gas Demand Adds Pressure on the Energy Sector

The LPG reforms are being introduced ahead of Pakistan’s winter season.

Demand for gas usually increases as temperatures fall.

The petroleum minister has estimated that domestic gas demand could rise by approximately 400–500 million cubic feet per day.

The government has indicated that it will make additional LNG arrangements if required.

Meanwhile, Sui Southern Gas Company has announced designated gas supply timings for domestic consumers during winter:

These timings apply to the announced SSGC arrangements. They should not be treated as a nationwide schedule for every gas utility.

The government will need to manage LPG, LNG and piped natural gas supplies together to reduce pressure on households.

When Will the New LPG System Start?

The government has said the revised arrangements are expected to become fully operational before winter.

The next important steps include:

1. Starting regular auctions for locally produced LPG.
2. Publishing auction results.
3. Arranging bulk imports through state-owned companies.
4. Requiring importers to disclose their monthly costs.
5. Establishing the subsidy arrangements for eligible BISP households.
6. Monitoring retailers and taking action against hoarding.
7. Maintaining LPG supplies for remote areas.

The government will also need to ensure that a small number of companies do not dominate the new bidding process.

Transparent auctions and effective regulation will be essential to achieving the policy’s objectives.

Conclusion: Will Pakistan’s LPG Reforms Benefit Consumers?

Pakistan’s decision to replace the LPG quota system with competitive auctions represents a major change in the energy market.

The new policy aims to open access to locally produced LPG, encourage imports and improve pricing transparency.

It also proposes targeted relief for eligible BISP households at Rs. 300–350 per kilogram.

However, the success of these measures will depend on implementation.

More imports, genuine competition and stronger action against hoarding will all be necessary to improve the market.

For ordinary households, the most important question is simple: will LPG become more affordable and readily available this winter?

The coming months will show whether the new system delivers the relief the government has promised.