ISLAMABAD, Dec 13: A unilateral increase in the prices of compressed natural gas (CNG), made early this week, has put the Oil and Gas Regulatory Authority (Ogra) in an awkward situation as the industry has refused to obey the regulator’s powers to cut prices.

On Wednesday, the Ogra said it had “directed all CNG licencees to immediately withdraw the aforesaid increase in the CNG price”. The industry representatives, however, said that theirs was a deregulated sector and the government or the regulator could not dictate its orders to such a sector.

“The consumer price of CNG cannot be legally increased as a cartel by the CNG licencees or their Associations,” said a spokesman for the Ogra in a statement. The spokesman said the Ogra had not allowed a Rs2.92 per kg increase in the CNG price across the country.

When contacted, chairman of the CNG-Stations Association, Tariq Kandan, told Dawn that the Ogra did not have the powers to issue directives for a price cut. He claimed that owners of CNG stations in the twin cities of Rawalpindi and Islamabad had not yet increased their prices but individually they were working out the revised details.

He said the CNG Stations Association had nothing to do with the price increase because most of its members were in fact competing with each other through discount offers. He said the prices had been increased in the NWFP about two months ago and those in the Punjab had followed suit a few days ago.

Mr Kandan said the state-owned stations of the Hydrocarbon Development Institute of Pakistan (HDIP) had started selling CNG at the rate of Rs32.50 per kg but later reduced to Rs31 per kg on the special instruction of the minister for petroleum. He argued that the actual cost of CNG was Rs32.50 but the government subsidised it to Rs31 per kg through HDIP stations and hence the private sector should not be expected to provide subsidy from its pocket.

He said the private sector had to pay much higher mark up rates on bank loans besides paying rentals and other expenditures on machinery, equipment and salaries. On the other hand, the HDIP plots were provided by the government, their equipment were funded through public funds and not loans and its workers were government employees.

On top of that, the HDIP stations were not required to pay professional tax, corporation tax, board tax, district administration tax and other fees unlike the private sector. He said there was a difference of Rs3.50 per kg in the cost of CNG production between the government and the private sector pumps and the private sector owners in the Punjab and the NWFP were selling it at Rs35 per kg and those in the twin cities at Rs33.46 per kg, compared with Rs31 per kg price at HDIP stations which was not unjustified.

The members of the Ogra authority were not ready to comment on the issue on record except for the three-line statement it issued. A member on the condition of anonymity, however, said the CNG industry was ganging up against Ogra’s decision to enforce security and safety standards that had led to closure of some stations in the recent past.

He said there was no justification for the increase in CNG prices at this stage because none of the input prices had increased. He said the CNG sector was deregulated but there had to be some basis for a price increase and hence “cartelisation” could not be allowed.