The LPG price in Pakistan escaped an auction that could have added Rs900 a cylinder. Buyers already pay about Rs1,700 over the cap.

The LPG price in Pakistan will not be pushed higher by a new auction system, at least for now. Prime Minister Shehbaz Sharif has rejected a Petroleum Division plan to auction LPG produced by state-owned companies, citing the absence of a legal and policy framework, Dawn reported on Friday. The plan would have added an estimated Rs900 to a domestic cylinder. Yet the bigger problem for households and businesses remains: cylinders are reportedly already selling far above the official price.

The short version

• The PM rejected auctions of LPG from four public-sector producers and declined interim measures, so the auctions will not go ahead.
• Approving the bids would have raised LPG prices by at least 15%, about Rs77,000 a tonne or roughly Rs900 per 11.8kg cylinder, Dawn reported.
• Ogra’s official October price is Rs3,296.23 a cylinder, but cylinders are reportedly changing hands at about Rs5,000.
• Imports are squeezed by the closure of the Strait of Hormuz, with more than 25,000 tonnes backed up near Gwadar.

What happened

The Petroleum Division wanted to replace the quota system for locally produced LPG with daily auctions of standard 5-tonne lots on three-year contracts. Petroleum Minister Ali Pervaiz Malik had directed Oil & Gas Development Company, Pakistan Petroleum, Pak-Arab Refinery and Government Holdings to offer lots on a pilot basis. According to Dawn, the highest bid was Rs205m for one lot, and the plan would have linked local producer prices to import parity while widening margins for marketing companies and distributors. Some existing LPG companies challenged the bidding in court, arguing current rules allow no such arrangement. The PM has now said a full policy change, backed by legal and regulatory frameworks, must come first.

Why it matters

Blocking the auction avoids a formal price rise, but it does not fix supply. Dawn reported that national LPG demand is 1.4 to 2 million tonnes a year, more than half of it imported, and that the Hormuz closure has left Oman as the main alternative source. Freight costs have jumped from $100 to $400 a tonne as bowsers wait about a month at Rahimdan, while storage at both Port Qasim LPG terminals is reported full. The official LPG price in Pakistan already rose about 8% for October, Ogra’s notification showed. The result is a roughly 52% premium in the open market, which is what businesses actually pay. It is the same Gulf supply shock behind daily petrol pricing and Pakistan’s push for a 15-year Saudi oil facility.

The knock-on effects

First order: no formal LPG price jump this month

Without the auction, the official cap stays where Ogra set it for October, at Rs279.34 a kg. Ogra’s November price, due at the start of next month, will reflect the Saudi Aramco contract price and the exchange rate as usual.

Second order: the shortage keeps setting the real price

Dawn’s sources blame weak enforcement and a lack of reporting for the shortage. As long as imports are slow to clear, restaurants, bakeries, small workshops and homes without piped gas will keep paying well above the cap, especially as winter demand rises and piped gas is rationed for industry and CNG.

Third order: a policy rewrite to come

The PM’s instruction points to a comprehensive LPG policy with legal backing. Any shift toward import-parity pricing for local producers would change the economics for state producers, marketing companies and distributors, and could raise the official price later, once rules are in place.

Who could benefit

• Households and small users: they avoid a further official increase of about Rs900 a cylinder for now.
• Existing quota holders: the current allocation system stays in place while a new policy is drafted.
• Firms with storage and import access: they can sell into a tight market at open-market prices.

Who may face pressure

• State producers hoping for import-parity prices on their LPG.
• Restaurants, bakeries and small industry that rely on cylinders and pay the open-market premium.
• Importers paying higher freight and waiting weeks to clear cargoes.

What to watch

• Ogra’s November LPG price, expected around 1 November 2026.
• The court challenge by existing LPG companies to the bidding process.
• Any draft LPG policy from the Petroleum Division.
• Clearance of the cargo backlog near Gwadar and the reopening of Gulf shipping routes.

Sources

• Dawn, PM rejects LPG auction sans legal cover, policy, 16 October 2026
• Dawn, LPG gets 8pc costlier ahead of winter, 1 October 2026

This is analysis, not investment advice. Figures are as of 16 October 2026.