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End the CNG mafia’s hold


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SOMETHING unusual is happening in the case against CNG station owners. In a rare show of unity, the government, Supreme Court and media agree that the era of exorbitant profits for CNG station owners must end.

In response the station owners have shut down their operations, giving rise to long queues at filling stations and crippling the movement of vehicular traffic.

The battle lines are now drawn, and the terms are clear. This is not about scoring cheap populist points to bring down the price of an item of mass consumption through government fiat.

Instead, it is a rare moment when the various organs of state, supported by the media, are taking on a powerful vested interest in the economy and persevering in their efforts despite the large and adverse fallout on the public.

It’s important that all parties united against this “mafia” of station owners hold the tiller firm. A prolonged shutdown of filling stations hurts the station owners more than anyone else, and the larger public will find ways to adapt in days to come.

But a steady and meaningful escalation from the government side is now called for, and the regulator and the petroleum ministry must start implementing some of the penal provisions that are their prerogative under the law.

The adviser petroleum, Dr Asim Hussain, who is acting as minister petroleum, has long opposed the use of CNG as a vehicular fuel and has publicly stated that the station owners will face penal action if they persist in their defiance of court orders and government action.

He has said that many members of the “mafia” are stealing gas, drawing more than their quota and on some occasions, not even paying for the gas that they are taking from the government and selling to the public.

The moment to act on these words has arrived. On Tuesday night, for instance, he said on prime time television that district coordination officers from around the country should send the Oil & Gas Regulatory Authority a list of those CNG stations that are shut down so that the regulator could begin action towards cancelling their licences.

I say why wait for the DCOs to make that report? Surely the regulator can get a report of who is open and who is not from the public distribution companies SSGC and SNGPL?

After all, if a station is shut then the amount of gas they’ll be drawing from the system will go down to zero, so all one has to do is issue notices to stations not drawing any gas from the public distribution companies, and begin action.

Another important step is to make public a list of those CNG station owners who have not been paying for their gas purchases from the government. We know such a list exists because the petroleum adviser himself alluded to it, and we know that a larger list of defaulters on gas bills was drawn up a few years ago by SNGPL. Let’s update the last list and publish the names.

A few station owners need to be made an example of for the rest to start taking government directions more seriously. Once penal action has been taken against a few, their licences terminated and bills given to them for gas purchases with arrears, the rest are more likely to sit up and think whether or not continued intransigence in the name of rentier profits is worth their while.

The station owners, for their part, claim they cannot continue their operations with losses. If the present price is a loss-making venture, then how are the company-operated pumps able to continue unabated?

According to reports being aired on television since the “strike” went into effect, NAB has documented the issuance of more than 400 new licences since a ban on new CNG stations went into effect in 2009. These licences were issued during the tenure of the past Ogra chairman, who must be made to answer a few questions, such as under whose authority he made this grant.

If the reports are untrue, and no new licences have been issued since the ban in 2009, then Ogra should clarify.

The time for decisive action is upon us. These station owners, after making obscene amounts of money at public expense and having robbed the public with one hand and the government with the other, have now decided to hold the commuter public hostage to continue their privileged access to a precious and scarce resource.

It would be a terrible shame if the united stand taken by the court, government and media should begin to cave in under the pressure of growing public indignation.

The Supreme Court is correct to insist that many cost heads under the pricing formula need to be eliminated. For example, under the present formula, the station owners claim salaries as a separate cost head for which they are reimbursed from the price charged to the consumer. Most businesses I know pay salaries from their own revenues.

Rationalising the price of CNG that the station owners are allowed to charge is critical to advancing gas-sector reforms, and to manage the growing scarcities of this precious fuel.

It’s true that this mess was created by the regime of Gen Musharraf. The proposal to use natural gas as a vehicular fuel dates back at least to 1991, if not earlier, but it was during the first Nawaz Sharif government, when Chaudhry Nisar was petroleum minister, that the proposal was shot down as too wasteful.

The good general was too keen to indulge people in their short-term desires and to bring about “consumption-led growth” and in the process bequeathed us this monstrosity called the CNG station owners’ mafia.

The moment to correct this error of mammoth proportions is now. The stars will not be so perfectly aligned for decisive action again. The government must seize the moment.

The writer is a Karachi-based journalist covering business and economic policy.

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Comments (24) Closed

Umair Khalid (@umairkd2011)
Nov 29, 2012 08:16am
Government, CNG Mafia, Ogra and CNG Stations all should share the blame. They have all exploited the poor people of Pakistan. And now they want to get rid of the CNG sector, which will make life tougher for the middle class. The middle class is forced to use small cars like mehran and alto on CNG for transporting themselves and their families as the private and govt. transportation facilities are pathetic. I think it's time the public should come on the streets and fight for their rights. The SC should ensure that the govt. , cng stations, cng mafia and ogra no longer exploits the poor people of Pakistan.
A Rauf
Nov 30, 2012 05:44am
Great article - very pertinent. In addition, My wife and I are praying for ghee + shakar in mouths of the striking CNG station owners as now we are able to use our gas heaters in Islamabad winter as a result !. Jokes aside, I would suggest that in medium term a plan be proposed to limit CNG solely for public transport vehicles (as a form of subsidy for the poorer segment of society - dirty word that it is to economists) and personal car CNG usage be banned !
Nov 29, 2012 06:59am
Your article sounds like finishing the CNG mafia off is the silver bullet for all the economic problems facing the poor. What's in it for me? I could drive around in a Suzuki Alto powered by CNG. If the CNG stations are forced to close then I'll have to carry my family on a motor-bike while the rich would be driving with their families in flashy new cars using petrol.
Nov 29, 2012 12:59pm
Procrastination and inaction are the main cause of all ills in this country. This exist from top to bottom. President Zardari not signing the death sentence of about 81 or so terrorist awarded death penalty by Supreme courts. Similarly in the case of CNG issue, how could the CNG station owners carry on their business without paying to SNGPL, but this is possible with the cooperation of SNGPL itself. As we all know that most of the organizations like KESC, KWSB, SNGPL etc, they all evade paying each other. KESC claims heavy amount payable by KWSB to them (KESC). A friend of mine who had a workshop which provided motor vehicle repair and maintenance service to Sui southern gas co's vehicle had to shut down his business for non payment of his dues by Sui Southern gas Co. If a domestic consumer of sui gas default in paying to the gas co, disconnection of gas supply is done efficiently, how come the CNG station owner keep on evading their dues? Non compliance by the CNG station owners despite court order is also an example of inaction by the Govt.
Nov 29, 2012 06:22pm
I feel that the writer is towing the Government line to strangle the CNG system so that they can bring in a new system where they can make more money
Arias89 (@Arias89)
Nov 29, 2012 11:56pm
Get rid of Zardari, nationalise key services and rescources.
Mustafa Razavi
Nov 29, 2012 05:35pm
We voted for the CNG mafia and all other mafias in 2008, we don't want to derail democracy, wait till the elections.
awamor logg
Nov 29, 2012 04:10pm
CNG should be reduced at least, Rs. 5 more. These pump owners had already played with the whole nation for few years. Those who negate the orders of S. C should bear the punishment for their licenses being ceased and the ownership as well. Government should install new man power to such pumps under its own supervision and pay the owners their invested amount on monthly or weekly bases as a reprimand. It is never too late to apply cost reduction approach on a sector like CNG. No owner will become a part of mafia group if such a strict law will be applied or any other law following same manner. OR In other way if this CNG sector is switched off from private sector to Public ,then , certainly Government can generate a boost to economy and monitor all financial and consumption matters.
Nov 29, 2012 02:01pm
Another proof is operating minimum units by the CNG owners. Greater the consumption, greater would be the loss. Despite of keeping their filling stations open to avoid cancellation of licenses, they are forced to consume less gas. Have you ever heard any shopkeeper keeping his shop open and not selling goods?
Muhammad Umar
Nov 29, 2012 07:43am
IF CNG owners claim that their businesses are in total loss if they sell the CNG on current price, then they are supposed to prove it.
Nov 29, 2012 01:51pm
There is no Mafia or conglomerate of CNG owners as they are the most disorganized group when it comes to protesting together. Secondly I wish Khurrum rather than politicizing this issue if you would actually do some number crunching and research you would understand that the 30 rupees reduction forced by the court included 20 taxes and 10 rupees margin. For any business to be successful it is imperative to have a good profit margin otherwise businesses shut down. Every business person has a right to shut their business if it does not make money. The court does not have any jurisdiction to determine the price nor does it have the jurisdiction to determine the formula. All it can do is give the judgement if the pricing formula has anything that is against the constitution. You as a journalist should be unbiased and should present both sides rather than give your own opinions. OGRA has handled the situation in the most unprofessional manner for which the CNG industry is being penalized. The chairman is not presenting OGRA's own point of view due to the fear of the Chief Justice sending him to NAB or jail for no reason. The CNG business is in a loss and the ones according to you that are open "company operated" or owned by the government are also running at a loss. They are only doing so because of the fear of the government and can afford to do so because they are large companies or the government itself. BTW there are only a handful company operated sites in the whole country now. If you would like to get more information or accurate numbers please feel free to contact me. Thanks!
Nov 29, 2012 01:48pm
SC is the real bone of contention. We are ready to purchase CNG on previous prices. Reinstate it because non availablity costs more than that.
Nov 29, 2012 01:41pm
The best way is to ask Petrol Pumps to have CNG availibility as well, that way CNG mafia would be broken and there will be no loss to pump owners
Murad Iqbal
Nov 29, 2012 11:39am
I think you mean can't agree more with what has been explained.
Nov 30, 2012 08:57pm
Just saw Khurram Husain on a TV channel in which he hardly could say anything to tow his line. He just sat there without saying much. I doubt if he knows what C N G stands for.
Fahad Hafeez
Nov 29, 2012 09:45am
A great article its high time to do some action , making a few owners an example would be enuf and rest would be well. its high time to take a stand against this mafia.
Fahad Hafeez
Nov 29, 2012 09:47am
Its not about clossing CNG altogether but to have a firm grip and disrupt this Mafia so that you and all other can enjoy CNG at affordable prices without the hassle of long ques.
Danyal Manzar
Nov 29, 2012 09:43am
Mr Umar you want proof: SSGC charges 25% GST(set by govt) on Gas provided to station owners(Go to SSGC to confirm this) KESC charges 16% GST( set by govt) on production of CNG from gas(coming under double taxation) You may go to KESC to confirm this. SSGC Charges(set by govt) 4% income tax KESC Charges (set by govt) 10% income tax again on the same product Govt charges CESS about 25% you may confirm this by ssgc also as they recover this. Base price given to cng stations 49.19 Plz do the math. And this has been the formula for a long time even when cng was 84. Its the govt making money not the CNG station owners. As you can see they have shut down because of this. In addition to this CNG owners operation on Petrol pumps have to give additional money of about upto 20% to oil marketing companies for using their premisses(Can be verified by going to Shell, PSO and Caltex.
Danyal Manzar
Nov 29, 2012 09:34am
Haha this artical shows how little you have knowledge. Please go read the formula that OGRA and the Ministry of petroleum have in place it will clearly show that the govt is charging 76% taxs if thats the case how is the stations owners making money?
Nov 29, 2012 07:35am
Very Nice Article.. Just cannot agree less with what you've so beautifully explained!
Dec 01, 2012 06:01am
Spot on!
Nov 29, 2012 09:00am
Corruption breeds Corruption. I am also in agreement that CNG mafia needs to be weakened. I ask the owners why do they give gas but overcharge a few rupees. (e.g. get Gas filled, and they will fill in 537, however will take 540 in cash and not give change.) Is this not corruption? Why did the transportation mafia not decrease costs for the public due to introduction of CNG. Now when CNG is not available, they put up costs with higher margins than what they were getting with CNG. Is this not corruption?
meekal a ahmed
Nov 29, 2012 08:51am
very good, Khurram.
Muhammad Umar
Nov 29, 2012 07:54am