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End the CNG mafia’s hold

November 29, 2012

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.