RULES, 1971

In exercise of the powers conferred by section 2 of the Regulation of Mines and Oilfields and Mineral Development (Government Control) Act, 1948 (XXIV of 1948). the Central Government is pleased to make the following rules, namely:-


  1.         Short title and commencement. (1) These rules may be called the Liquefied Petroleum Gas (Production and Distribution) Rules, 1971.

(2) They shall come into force at once.

  1.         Definitions. In these rules, unless there is anything repugnant in the subject or context.-
    (a) ‘area of operation’ means the area within which a licensee is authorised to produce, separate, strip, liquefy, transmit, process, store, fill or distribute LPG base-stock or liquefied petroleum gas;

(b) ‘Authority’ means any officer appointed by the Central Government to exercise the powers and perform the functions of the Authority under these rules;

(c) ‘consumer’ means any person or corporation who is supplied with liquefied petroleum gas by a licensee for his own use and not for storage, processing, filling, sale or distribution;

(d) ‘container’ means any cylinder or vessel, portable or otherwise, used for storing transporting and distributing liquefied petroleum gas;

(e) ‘corporation’ includes any corporation, joint stock company partnership association, business trust, organized group of persons, whether incorporated or not, and receiver or trustee of any of them-;

(f) ‘licensee’ means a person who holds a license under Part II of these rules;

(g) ‘Liquefied petroleum gas’ or ‘LPG’ means hydrocarbons, mainly consisting of propane and butane, mixed or unmixed, whether with or without other gases, which are vapours at room temperature and pressure but can be liquefied on slight compression;

(h) ‘LPG base-stock’ means that product which is produced, separated, stripped, liquefied or transmitted from a refinery or Unit located near or connected to Well-hand;

(i) ‘meter’ means all equipment used for the purpose of measuring the quantity of LPG base-stock and LPG supplied and includes all kinds of apparatus upon whose reading or indication for the supply or sale of LPG base-stock and LPG are wholly or partly determined in a specified or unspecified time;

(j) ‘reasonable rate of return’ means the level of profits determined by the authority which would, in the opinion of the Authority, be adequate to cover all operational and other expenses and provide a fair return on investment;

(k) ‘source’ of LPG base-stock means any refinery or unit located near or in any way connected to Well-head for the production, separation, stripping, liquefying of LPG base-stock by chemical or any other process;

(l) ‘transmission line’ means a pipeline used for the transportation of liquefied petroleum gas whether in liquid or gaseous form for the purpose of sale to. or by, a licensee;

(m) ‘works’ includes transmission lines, machinery or equipment owned, controlled, operated or managed in connection with LPG base-stock or LPG established or installed for the purpose of production, liquefaction, separation, stripping, transmission, storage, processing, filling or distribution.


  1.         Licence compulsory. No person or corporation shall, without first obtaining a licence and product allocation for the purpose from the Authority, undertake or cause to be undertaken under any agreement, the operation or constructure of works, connected with production, liquefaction, separation, stripping, transmission, storage, processing filling or distribution, LPG base-stock or liquefied petroleum gas.
  1.         Application for licence. (1) A corporation entitled by its memorandum of association or other appropriate instrument to engage in the production, liquefaction, separation, stripping, transmission, processing storage, filling or distribution of LPG base-stock or LPG may submit an application for a licence and product allocation to the Authority.

(2) An application for licence shall be in triplicate in the form annexed to these rules and shall be accompanied by a fee of one thousand rupees, which shall in no case be refunded.

  1.         Consideration of application. (1) The Authority shall consider the application having regard to all the circumstances which appear to it to be relevant and in particular, but not so as limit the generality of the foregoing to-

(a) the public and national interest;

(b) the financial and technica competence of the applicant.

(2) The Authority may require such changes and alterations in the plans and in the details to be made as it may deem expedient.

(3) The Authority may specify the source of the LPG base-stock and quantities of LPG that a’ licensee may be allowed to process, store or distribute-from his works in the whole or part of its area of operation.

(4) A licensee shall be bound by their provisions contained in these rules and such other terms and conditions as may be specified in the licence.

  1.         Authority may grant or refuse licence. (1) The Authority may grant a licence for the production, processing, storing, filling or distribution of LPG base-stock or LPG in accordance with the rules and may specify in the licence such terms and conditions as it may think fit to impose on the licensee, or it may refuse to grant the licence:
    Provided that any person or corporation who or which was engaged, immediately before the commencement of these rules and with the approval of the Central Government, in the processing, filling or distribution of LPG or. in whose favour sanction for production, liquefaction, separation, stripping or transmission of LPG base-stock or storage, processing, filling or distribution of LPG was issued by the Central Government before such commencement shall be granted a licence, if such person or corporation makes an application in the form annexed to these rules for the purpose within three months from the commencement of these rules.

(2) In case of refusal to grant a licence an appeal shall lie from the decision of the Authority to the Central Government.

  1.         Renewal of licence. (1) A licence granted under these Rules shall, unless earlier revoked under rule 8, remain valid for a period of fifteen years and may be renewed from time to time for a period of five years each time on payment of a fee of rupees one thousand.

(2) Every licensee desiring to have his licence renewed shall make an application in that behalf to the Authority, not less than three months preceding the expiry of the period for which the licence is valid.

(3) No application for a renewal of a licence shall be refused unless the licensee has been given an opportunity of being heard.

(4) In case of refusal to renew a licence an appeal shall lie from the decision of the Authority to the Central Government.

  1.         Revocation or amendment of licences. (1) The Authority may, if in its opinion the public interest so requires, revoke a licence in any of the following cases, namely:-

(a) Where the licensee, in the opinion of the Authority, makes wilful and unreasonably prolonged default in doing anything required of him by these rules and has been informed in writing to that effect by the Authority;

(b) Where the licensee violates any of the terms or conditions of his licence is so informed in writing and does not rectify the violation within the time specified;

(c) Where the licensee, is, in the opinion of the Authority, unable by reason of his insolvency, fully and efficiently to discharge the duties and obligations imposed on him by his licence.

(2) Where, in the opinion of the Authority, the public and national interest so requires the Authority may, instead of revoking a licence under sub-rule (1), permit it to remain in force in relation to the whole or any part of the area of operation with such alterations or amendments in the terms and conditions of the licence as it thinks fit to make, or upon such new terms and conditions as it may impose upon the licensee

(3) In case of revocation of a licence or alterations or amendments in the terms and conditions thereof an appeal shall lie from the decision of the Authority to the Central Government.

  1.         Licensee not to sell, assign, transfer, convey or lease his licence or works. No licensee shall, without the previous approval in writing of the Authority,-

(a) sell, assign, transfer, convey or lease his licence or his works or any interest therein in whole or in part;

(b) enter into any agreement or contract for-

(I) the amalgamation of his works with those of any other person or corporation; or

(II) the operation of his works by any other person or corporation;

(c) mortgage or otherwise create a charge upon the works or any interest therein.

  1. Authority in approve agreements. No agreement relating to supply, sale, storage, processing, filling and distribution of LPG base-stock or liquefied petroleum gas shall, without the prior approval in writing of the Authority, be entered into between the licensees and licensees or between the licensees and consumers.
  1. Execution of works after commencement of licence. The licensee, after the commencement of the licence, shall execute to the satisfaction of the Authority his works within a period of six months or such further period as the Authority may allow under special circumstances proved by the licensee to be beyond his control.
  1.       Addition to or extension to the works. A licensee shall not make any major alteration in, addition to or extension of his works as given in his plan and approved by the Authority, unless such alteration, addition or extension is approved by the Authority.
  2.       Ritht to discontinue supply. A licensee may temporarily discontinue supply of LPG base-stock or LPG When such discontinuance becomes necessary for maintenance of works.
  1.       Licensee can refuse supply. If a licensee proves to the satisfaction of the Authority that further demand cannot be met on account of limited quantity of LPG base-stock at the source or on account of shortage of essential material and equipment or for any other reasonable grounds, the licensee may, with the prior approval in writing of the Authority, refuse to supply the LPG base stock or LPG to any other licensee or consumer or may refuse to increase the existing supply to any licensee or consumer.
  1.       Prohibition of abandonment of works. No licensee shall abandon any works or portion of works without the prior approval in writing of the Authority.


  1.       The Authority to fix maximum rates. (1) The prices for LPG base-stock and LPG sold by a licensee shall be charged in accordance with the method of charges approved by the Authority and shall not exceed the maximum rates fixed by the Authority.
  2.       Measurement.(2) In fixing the rates under sub-rule (1), the Authority shall allow a reasonable rate of return to the licensee.
  3.       Minimum charges. A licensee may charge a consumer a minimum charge for the retention of containers determined in such manner as may be approved by the Authority and such minimum charge shall be payable by the consumer notwithstanding that no LPG has been used by the consumer during the period for which such minimum charge is made.

(1) The amount of LPG base-stock supplied to a licensee and LPG supplied to a consumer shall be ascertained by means of a correct meter.

(2) A licensee may require another licensee or a consumer, as the case may be, to give him security deposits for the price of a meter and container or to enter into an agreement for the hire and maintenance thereof, and where the licensee or the consumer, as the case may be, enters into such an agreement the latter shall keep the meter and container in correct and good condition.

  1.       Inspection of meters, etc. The licensee or any person duly authorised by the licensee shall, at any reasonable time, have access to and be at liberty to inspect and test any meters and containers and unless such inspection and test shows the meters and containers to be incorrect or faulty, all reasonable expenses of and incidental to such inspection and test, if done, at the instance of the consumer shall be recovered from the consumer, and if any difference or dispute arises as to the amount of such reasonable expenses. The matter shall be referred to the Authority whose decision thereon shall be final.

Explanation. A meter shall be deemed to be correct if it registers the amount of gas supplied within the limits of error approved by the Authority and complies with such conditions as may be prescribed by the Authority. The accuracy of any container will be checked by weighing the contents of a full container and deducting the weight of the container to cakulate the volume of the contents.

  1.       Rates and charges to be reasonable and undue preferences, etc, not to be granted. (1) All rates and charges made, demanded or received by any licensee for, or in connection with the transportation or sale of, LPG base-stock and LPG and all rules and regulations affecting or pertaining to such rates or charges shall be just and reasonable.

(2) Except with the written permission of the Authority no licensee shall, with respect to any transportation or sale of LPG or LPG base-stock, make or grant any undue preference or advantage to any consumer or licensee or subject any consumer or licensee any undue prejudice or disadvantage or maintain any unreasonable difference in rates, charges, services, facilities, either as between one locality and another or between one class of consumers and another or between licensee and licensees when the LPG or LPG base-stock is supplied in the same conditions of supply and for the same class of use.

  1.       Power to regulate distribution of LPG. Notwithstanding anything contained in a contract or an agreement between one licensee and another or between a licensee and a consumer, the Authority may, if it is satisfied that it is necessary in the public interest so to do, by order in writing, determine the maximum and minimum quantities of LPG base-stock and LPG which a licensee may supply to another licensee or to a consumer, whether generally or during such period as may be specified in the order.
  2.       Disputes on rates and charges to be referred to the Authority. In case of disputes over rates and charges of the licensee or in respect of any provision of rules 17, 18 and 20 the matter shall be referred to the Authority whose decision thereon shall be final and binding on the disputing parties.
  1.       Records and accounts. Every licensee shall make, keep and preserve for such period such accounts, records of cost accounting, procedures, correspondence, memoranda, papers, books and other records as the Authority may specify or require for examination and inspection, and shall submit to the Authority such accounts, statistics and information in such forms and for such period as the Authority may prescribe.
  1.       Audit of accounts of licensee. The licensee shall also observe the following provisions as to the audit of accounts:-

(a) the annual statement of accounts of the undertaking shall, before being submitted under rules 23 to the Authority, be examined and audited by a Registered Accountant;

(b) the Authority may in its discretion have the accounts further audited by an auditor appointed by the Authority and in that event the licensee shall afford to such Auditor, his clerks and assistants, access to all such books and documents relating to the undertaking of the licensee as are necessary for the purpose of the audit and shall, when required, furnish to them all vouchers and information requisite for that purpose and afford to them all facilities for the proper execution of their duty; and

(c) any report made by the Auditor or such portion thereof as the Authority may direct shall be appended to the annual statement of accounts of the licensee and shall thenceforth form part thereof.

  1. Wilful hindrance in submitting records, etc, unlawful. No person shall willfully hinder, delay or obstruct the making, submitting or keeping of any information, document, report, memorandum or record or accounts required to be made, submitted or kept under these rules.


  1.       Entry, inspection and enforcement of the rules. The Authority may, enter, inspect and examine any place in which he has reason to believe that there is any works for filling, storing, processing, measuring or distributing of LPG base-stock and LPG and take other necessary steps or the due observance of the provisions of these rules by licensees, consumers or any other person connected with the transmission, distribution, supply and use of LPG base-stock or LPG.
  1.       Protection for acts done in good faith. No suit, prosecution, or other proceeding shall be instituted against the Authority for anything done, or purporting to be done, in good faith under the provisions of these rules.
  1.       Protection to public. A licensee shall locate, construct and operate his works connected with LPG base-stock and LPG in accordance with the Petroleum Rules, 1937, so as not to endanger the public health or safety
  1.       Marking of storage. A licensee shall mark with conspicuous signs on the place at which the storage tanks are located.
  1.       Penalty for breach of rules. Whoever commits a breach of these rules shall without prejudice to any other action that may be taken against him, be punishable for every such breach with fine which may extend to fifty thousand rupees.


To be submitted in triplicate alongwith a fee of Rs. 1.000 which should be deposited in Government Treasury under the Head of Account ‘XL VI-Miscellaneous-Receipts arising out of Mines, Oilfields and Mineral Development (Federal Control) Act, 1948 – Other Receipts’ and challan attached].

(1) Name (s) of Applicants (s) in full

(2) If application is by an individual or individuals:

(a) Address

(b) Nationality

(c) Present Occupation and Duration ___

(d) Previous Experience and Duration __

(3) If application is by a corporation:-

(i) (a) Presents business (es)

(b) Location (s) ______

(c) Last 3 years’ Audited Reports

(ii) If principal place of business is outside Pakistan, name and address of the duly authorised agent in Pakistan with particulars as in 3(1) above

(iii) Names of all directors Nationality Shareholding Directive or Executive Authority
(1)                    (1)                   (1)                   (1)
(2)                    (2)                   (2)                   (2)
(3)                    (3)                   (3)                   (3)
(4)                    (4)                   (4)                   (4)
(5)                    (5)                   (5)                   (5)
(6)                    (6)                   (6)                   (6)

(iv) Names and nationality of
principal shareholders Amount of shareholding
(1)                    (1)
(2)                    (2)
(3)                    (3)
(4)                    (4)
(5)                    (5)
(6)                    (6)

(4) The measure of control of ownership or influence, if any, exercised by the applicant in any other organization, or over applicant by any other organization. Cive details.

(5) Location and area of operation for the activity/activities applied for (Existing/proposed)

(6) Project details (attach a report giving the following):

(A) Production/Separation/Processing/Stripping/Storage/Filling/Plants:

(i) Nature and capacity of fixed assets

(ii) Source of raw material

(iii) Details of utilities and services

(iv) Details of technical and operational personnel with an organogram

(v) If new project, the period of completion and time of commissioning

(vi) Capital cost, existing or estimated under following heads (give breakdown of foreign exchange and rupee cost separately):

(a) plant cost (separately for the activities applied for)

(b) Land

(c) Building

(d) Electrical Equipments

(e) Fire fighting equipments

(f) Furniture and fixture

(g) Vehicles and transport

(h) Construction and engineering (for new projects) and other miscellaneous assets

(B) Transmission/Distribution (give the following additional details):

(i) Whether transportation in bulk or in cylinder indicating number and capacity of tankers/cylinders
(ii) Regulators, valves and other accessories

(C) Capital structure of the existing project and or the mode of financing for the proposed project should be clearly indicated in regard to equity, reserves, loans, debentures, suppliers credits, own funds, etc. (Certificates or letters of commitment of the financing agencies, if any, for financing the project be attached)

(D) Economics of the project annually for the next 10 years (Existing/Proposed):

(i) Production/sales turn over indicating foreign and local markets with break down of consumers and areas
(ii) Unit purchase and sale price
(iii) Processing expenses/administration expense/selling expenses/distribution expenses
(iv) Maintenance cost (for cylinders and regulators separately in case of distribution activities)
(v) Freight cost on cylinders or bulk transport (for transmission and distribution activities)
(vi) Depreciation (separately for plant and other items) (vii)Total cost of sales and net profit

(7) For distribution licence indicate the details on which LPG requirements in the area of operation (applied area) are based indicating market surveys, if any, carried out

(8) In respect of an application for distributing of LPG, specify the quantity and source for and from which allocation is required in order of preference … ..

(9) Miscellaneous:

(i) Details of foreign exchange savings generated by the project …
(ii) Attach copies, if any, of sanctions/permissions issued by the Government or Government agencies for financing/operation of the project … …
(iii) Any other relevant information which may be helpful in the evaluation of the project

(10) Remarks:
I/We hereby solemnly declare that all the particulars given above are correct.
*I/We hereby solemnly declare that if a licence is granted to me/us. I/We will abstain from all political activity or activities whatsoever affecting the sovereignty or security of Pakistan or such as may be tantamount to interference in its internal affairs and that, I/We eschew all espionage.
I/We solemnly undertake not to sell, mortgage, etc; either directly or indirectly or through association, the rights, privileges and obligations granted under this licence.
*In the event of any violation of this undertaking by me/us the Authority shall have the right to cancel the licence: provided that any dispute between the Authority and the applicant as to whether any of my/our activities can be considered as a violation of this undertaking shall be subject to settlement in accordance with the provision of sub-rule (3) of rule 8 of the Liquefied Petroleum Gas (Production and Distribution) Rules, 1971, and the appropriate clause in the licence.

Signature (s) Applicant (s) __________
Date and place of application ______________________
(if the applicant is a corporation, capacity, in which form is signed)
In case the applicant is an alien or a corporation incorporated outside Pakistan.

Print Friendly, PDF & Email

Related Case Law