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SC questions mechanism behind hike in gas, petroleum prices

October 18, 2012

The Supreme Court of Pakistan.—AFP Photo

ISLAMABAD: The Supreme Court on Thursday directed the secretary for the ministry of petroleum to submit by Oct 24 relevant documents on the break up of gas consumer prices along with an acceptable formula to justify the hike in petroleum and gas prices.

A three-judge bench, comprising Chief Justice Iftikhar Muhammad Chaudhry, Justice Jawwad S. Khawaja and Justice Khilji Arif Hussain, took up the issue of implementation of recommendations contained in a report by Justice (Retd) Rana Bhagwandas’ report, who is a former SC judge.

The bench was hearing a case against the appointment of former chairman of the Oil and Gas Regulatory Authority (Ogra) Tauqir Sadiq, a relative of PPP Secretary General Jehangir Badar who is absconding and unable to be traced by the National Accountability Bureau (NAB) despite repeated court orders.

During the last hearing on the case, the court had summoned Petroleum Secretary Dr Waqar Masood and incumbent Ogra chairman Saeed Ahmed Khan for today and had clubbed together another case it had earlier initiated after the submission of a report by the Bhagwandas Commission on oil pricing mechanism.

The bench in its order directed concerned authorities to explain the linkage between prices of CNG and petroleum products, price ratio with components, and the decision of the federal cabinet’s Economic Coordination Committee (ECC) allowing OGRA and the ministry of petroleum to raise prices on a weekly basis.

During the course of today’s proceedings, the chief justice asked Dr Waqar Masood to explain the hike in CNG prices when the Bhagwandas Commission report concluded it could be sold at a substantially lower price of Rs17 per kg.

The secretary said that the report did not focus on CNG and dispelled the impression that CNG prices were raised without following any process.

He said the approval to raise prices was given by the ECC while OGRA was the only downstream regulator which only implemented guidelines provided by the government as highlighted in section 21 of the OGRA ordinance.

Moreover, he said CNG prices were linked with petroleum products; although the CNG sector had witnessed phenomenal growth, resources had not been expanded, he explained

The chief justice brought his attention to the use of natural gas by domestic consumers and said that it was the poor consumer who had to suffer due to such situation.

The secretary contended that due to distribution among various sectors, domestic consumers were getting the maximum subsidy of Rs46 billion.

The CJ observed that they would have entered into agreement with certain companies for specific period and not on daily basis under which the prices were revised.

The secretary said that according to the government’s decision, price of CNG had to be kept at 60 per cent parity with petroleum products.

To another question, chairman OGRA Saeed Ahmad Khan replied that minimum price for the domestic consumer was between Rs175 and Rs180 per MMBT including distribution and expenditure costs.

The secretary petroleum said that they had to import 85 per cent petroleum products while the fluctuations in prices of CNG on weekly basis had provided relief to the public.

Justice Jawwad S. Khawaja observed that after the 18th Amendment, the issue to determine prices was not vested with the ECC; rather it had become an issue to be raised at the Council of Common Interest (CCI).

Further hearing on the case was adjourned until October 24.