A major slash in CNG prices by Supreme Court on October 25, aimed at providing relief to commuters — by curtailing dealers’ unjustified profits — has turned into a crisis.
But it carries the risk of bringing to an end the short-lived period of cheap fuel for the middle class while making commuting much costlier. In the eyes of the ministry of petroleum, an appropriate solution of the crisis is a phase-out of the CNG from the transport sector through direct or indirect methods and its diversion towards the industry.
The burning of the gas in vehicles is seen as a sheer waste of a valuable natural resource and its non-availability to the industry is causing heavy losses to the economy. For long, the advisor to the ministry has been advocating this remedy. But this solution is not without its damaging effects on the economy and common man. There will be a fresh wave of hike in prices of all kinds of commodities and services when CNG becomes as dearer as petrol and diesel.
Meanwhile, Oil and Gas Regulatory Authority (Ogra) has suggested deregulation of CNG prices as a solution of the current crisis so as to let the market forces determine the actual price. Its chairman says that existing laws empower Ogra to fix sale of gas price to CNG stations, but not fix CNG consumer prices. This legal lacuna can put the government and Ogra in an embarrassing position before the court. Apart from deregulation, he has proposed two more options to the government. These are fixing of CNG consumer price by the government itself as per their policy and making an amendment in Ogra ordinance 2002 to enable the Ogra to regulate CNG consumer prices and provide its price-fixing a legal cover to avoid an adverse decision by the Supreme Court.
What is amazing to note is the sheer lack of sense of urgency on the part of the state organs, related ministries and even the court to resolve the grave crisis which has apparently spiralled out of the control of the stakeholders. The cut in prices which was described by the Chief Justice as an Eid gift and a respite for the middle class has gradually turned into a nightmare for them. Consumers have to stand in long queues, which become longer with the passage of time, before the CNG filling stations for several hours, and tolerating at least three days in a week without gas.
But the situation created by protest closures of filling stations by their owners because the new prices have drastically cut their profits, ‘suits’ the government. “If CNG stations become fully operational,” says a senior official, “millions of domestic consumers won’t be able to prepare breakfast.” The choice for the government is between cooking food and running luxury cars on cheaper fuel. Obviously, domestic sector must get top priority, followed by industry. Since about 30 per cent of the stations have already opted to close their businesses and others are irregular in serving their customers, there has been no complaint of low gas pressure from domestic consumers.
The preference to domestic sector, which gets gas on subsidised rates, has resulted in reduced supply of natural gas to some industrial sectors and there are cases of disconnections as well. The Sui Northern Gas Pipelines Ltd is reported to have cut off the gas supply to some industries in Punjab. The supply was earlier reduced to two days a week only. The All Pakistan Textile Mills Association has expressed resentment over it. Since about 75 per cent of the country’s textile mills are located in Punjab, gas shortage has hit the industry badly. With the advent of winter, there has been an increase in the consumption of gas by domestic sector and this may remain unchanged.
It is surprising to note that the reduced availability of CNG has not led to increased consumption of petrol and diesel in the country as was expected. Instead, commuters still prefer to spend hours in queue to get CNG for reasons of vast price difference. Another reason, officials believe, may be slower pace of economic and industrial activities. During November, the consumption of petrol and high speed diesel was short of target by 3.8 and 2.7 per cent respectively.
The Supreme Court, as is generally believed, did not directly order a reduction in the price of CNG on October 25. It was the federal government which itself chose to cut the operating cost of Rs20 per kg. Besides, it was reluctant to reveal how it fixes the CNG prices.When pressed by the court it disclosed that some top functionaries were involved in making huge illegal profits on a daily basis. In fact, the government withdrew the operating cost even before the court order was dictated.
Meanwhile, some analysts have equated the Supreme Court’s order on CNG prices with its previous decision of rejecting sale of the Pakistan Steel Mills. Its previous decision, they observed, had shaken the confidence of local and foreign investors and stopped privatisation process.
“The CNG decision may produce similar results because it doesn’t fully take into account the overall economic perspective in which the government had linked CNG prices with petrol and ignored the negative impact of its decision.”
While it is good, they said, that the court has exposed the CNG station owners by revealing hefty profits they were making in the name of operating costs, the overall reduction in the fuel’s price from 60 per cent to 35 per cent of petrol is bound to encourage its rapid use, even by those who can comfortably afford consumption of petrol. Hence, it is not the poor but the rich who happen to be the beneficiary of the court’s order.