📈 LPG Price Inequity: Subsidies Burdening Lower-Income Segments

The Advocata Institute has warned that recent domestic Liquefied Petroleum Gas (LPG) price hikes remain below cost-reflective levels, creating a regressive subsidy model that disproportionately benefits the wealthy. • Pricing Discrepancy: Following a sharp rise in the Saudi Aramco benchmark, the landing cost of a 12.5kg cylinder rose by Rs. 1,000–1,200. However, the retail price was increased by only Rs. 775, leaving a shortfall of Rs. 225–425 per cylinder. • Cross-Subsidization Impact: To cover the gap, higher prices are charged to industrial users. These costs are passed back to the public through more expensive goods and services, effectively taxing those who do not use LPG. • Income Disparity: Data highlights a significant usage gap: 80% of households in the highest expenditure tier use LPG. Less than 8% of the lowest-income tier use LPG. 55.4% of households nationwide still rely on firewood. • Economic Risks: Maintaining prices below cost discourages energy conservation, pressures foreign exchange reserves, and creates an artificial price ceiling that may drive out private sector competitors, stifling investment in the energy sector. • Recommendation: Advocata urges the government to adopt a fully cost-reflective pricing mechanism paired with targeted cash transfers to protect truly vulnerable households.