Over the past 15 years, the government has been encouraging use of CNG in private transport as an environment friendly fuel and to reduce dependence on expensive imported fuels – a trend the government is now trying to reverse. - File photo

ISLAMABAD: Caught in a gas shortage crisis, the government has decided in principle to reduce petroleum levy on diesel by 50 per cent and gradually increase rates for compressed natural gas (CNG) to discourage natural gas consumption in the transport sector.

A preliminary agreement on the decision was reached during a recent meeting presided over by Petroleum Minister Dr Asim Hussain.

The minister confirmed to Dawn that the government was considering cutting petroleum levy on high speed diesel by half under a long-term strategy to incentivise the private transport so that it switched back to diesel.

The government is currently charging about Rs8 per liter on high speed diesel that would come down to Rs4 after the implementation of the decision. He, however, agreed that revision of gas and diesel prices would not take place overnight because people had made investments and would be given opportunity to phase out.

“This may take up to six months to be fully in place but the guiding principle is to gradually increase CNG prices and reduce diesel prices. Also, the long-term policy objective is to restrict CNG consumption only for public sector transport,” he said.

He said the government would work out what should be the formula for gradual increase in CNG rates, how the duties and taxes on CNG kits and equipment could be increased and how the public transport be diverted to the CNG stations.

“Ultimately, the major changes in taxes and duties would perhaps be introduced through the next budget,” he said.A minor increase in CNG rates early this month led to violent street protests by transporters and CNG stations’ owners, particularly in Punjab, when the government also put a ban on un-registered CNG fittings. The government had to partially reduce imposition of gas infrastructure development cess on CNG and held in abeyance a crackdown on unauthorised fitting on CNG kits.

Dr Hussain said he was engaging with various stakeholders for new ideas to minimise the gas shortage, adding that the price cut in diesel and increase in CNG was one of such ideas crystallised so far.

He said that bringing additional 180 million cubic feet of gas from Kunar-Pasakhi field into the system was on priority to increase its supply to about 280 MMCFD.

Dr Asim’s new initiative, however, is in contradiction to the prevailing government policies.

Over the past 15 years, the government has been encouraging use of CNG in private transport as an environment friendly fuel and to reduce dependence on expensive imported fuels – a trend the government is now trying to reverse.

Currently, Pakistan is the largest CNG consuming country. Due to price differential between CNG and petrol, consumers prefer to convert their vehicles to CNG. Presently, there are about 4,000 CNG stations in the country and the number of CNG vehicles has reached about 3.3 million.

Of late, the government has adopted a policy of de-dieselisation in cooperation with provincial governments. For instance, diesel-operated intra-city urban public transport is being phased out in Karachi, Hyderabad, Lahore, Faisalabad, Peshawar, Quetta and Islamabad and Rawalpindi. Dr Asim believes that public transport should be shifted to CNG and private vehicles, including cargo fleet, should be run at lower diesel prices.