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Many outlets closed: CNG stations warned against overcharging

October 26, 2012

– File Photo

ISLAMABAD: A number of CNG stations remained closed on Friday and their owners expressed reservations over the new formula under which the price of the transport fuel was reduced by over Rs30 per kg.

On the other hand, the Oil and Gas Regulatory Authority (Ogra) issued a stern warning to the CNG stations. “Chief secretaries of the provinces have been requested to take strict action against CNG stations overcharging consumers,” a spokesman for the regulator said.

Prime Minister’s Adviser on Petroleum and Natural Resources Dr Asim Hussain warned that the stations which would remain closed despite clear direction of the Supreme Court risked losing their licence.

In compliance with a Supreme Court order, the government had on Thursday reduced the CNG price. It also completely suspended the Rs20.80 per kg operating cost allowed in the sale price of CNG and another Rs4.98 per kg reduction in CNG stations’ net profit from Rs11.20 to Rs6.22.

The Ogra spokesman said the managing directors of SNGPL and SSGCL had been directed to depute their teams to check and disconnect gas supply to CNG stations charging old prices and violating Ogra notification about price reduction.

However, it appears that there is no regulation to prevent closure of CNG stations.

“This is a tricky issue; maybe the district administration can find a way to get the closed CNG stations opened,” said an official of the petroleum ministry.

The CNG sector termed the new pricing formula notified by Ogra a violation and misinterpretation of the apex court’s order. Ogra fixed the prices on directives of the petroleum ministry, instead of acting like a regulator.

Although the court ordered that CNG rates be brought to the July 1 level, the Ogra notification issued on Thursday night shows that its price is Rs61.64 per kg for Region-I and Rs54.16 for Region-II. CNG rates notified by Ogra on July 1 this year as pointed out by the court were Rs77.36 per kg for Region-I and Rs70.63 for Region-II.

Region-I comprises Khyber Pakhtunkhwa, Balochistan and Potohar region and Region-II comprises Sindh and Punjab.

Ogra, in consultations with the petroleum ministry, reduced the CNG price by over Rs30 per kg, which means it cost the owners of CNG stations over Rs20 per kg after the suspension of their operating cost and the government Rs10 per kg in the form of reduction in development surcharge and general sales tax.

“We have reduced Rs4 in terms of gas price and the overall reduction in taxes and GST is Rs6,” the petroleum ministry official said.

The decision hurt the CNG sector and many stations stopped selling CNG on Thursday night and on Friday. The CNG association said the court’s order had been misinterpreted because the government’s decision had depleted even their operating expenditures.

“The reduction has to be made in gas charges and the illegal increase in gas infrastructure development cess, but they (government) have worked out a new formula where there is no option for electricity charges,” said Ghyas Paracha, former chairman of the All Pakistan CNG Association.

The overall operating expenditure as agreed by the government and the CNG sector is Rs20.76 per kg, which includes Rs11 for electricity used to convert natural gas into CNG, Rs1.05 as government licence fee and Rs3.65 as licence fee for oil companies where CNG supply is arranged at petrol stations and 96 paisa for labour charges, etc.

The CNG sector is allowed to have profits of Rs11 per kg as per their agreement with the government.

But according to the Ogra notification, the operating expenses have been reduced by about Rs16 from Rs20 and profits slashed by Rs4.

“Now how will we pay electricity charges,” Mr Paracha said.

The secretary petroleum said it was an ad hoc arrangement and a new formula would be worked out in consultations with the CNG sector.

Ogra announced that a public hearing would be held on Tuesday to determine the operating expenditures and profits of the CNG sector.

Agencies add: Adviser on Petroleum and Natural Resources Dr Asim Hussain said on Friday that the government would take action against those CNG station owners who had shut down their outlets.

Many CNG stations in Karachi remained closed on Friday, causing hardship to the public, while most gas stations reportedly turned away customers on the pretext of ‘technical faults’.

Despite Friday being a holiday, public transport remained sparse on roads and people were forced to commute on rooftops of buses.

Speaking to the media, Dr Asim said that a list of stations which were closed after CNG prices had been slashed was being compiled, adding that legal action would be taken against them.

He urged the provincial governments to ensure immediate implementation of the court’s directions. He said licences of stations continuing to remain closed would be cancelled.

Meanwhile, Ogra is learnt to have dispatched its teams to different areas to monitor and control CNG prices.