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CNG saga heading towards permanent shutdown

January 06, 2013

Motorists queue up for CNG in Islamabad. - File photo
Motorists queue up for CNG in Islamabad. - File photo

Though the government never announced CNG supply closure publicly, motorists feel that they would have no option but to run on petrol for good.

The past week witnessed an extraordinary rush of vehicles at petrol stations as there was no compressed natural gas (CNG) supply and even not enough petrol.

The crisis emerged when the vehicles running on CNG were left with no other option but to opt for petrol thanks to unavailability of the cheap fuel.

But as the motorists reached the filling stations to fill their tanks with petrol, the latter had no sufficient stock to meet the rising demand. Though the petrol shortage was overcome within about 24 hours, the CNG shutdown appears to be a permanent phenomenon.

“The gas supply to CNG stations in Punjab is expected to remain suspended during January because of the high domestic demand caused by the low temperature,” said Amjad Latif, a senior official of the Sui Northern Gas Pipelines (SNGPL).

However, the government decision to close the CNG supply in January has not yet been publicly announced. But consumers have begun sensing what the government had in store for them and many vehicle owners have got ready to drive without CNG.

“Every day we get two or three vehicles whose owners want them adjusted for optimum petrol consumption. A car that is equipped to run on the CNG consumes a lot of petrol,” said Amjad Hussain, a mechanic at the I-9 auto-market. The adjustments are being made as consumers realise that their cars will now have to run on petrol for most of the time, he added.

The shortage is the latest in the ongoing CNG saga that took a turn for the worse when the government decided in July 2012 to link the prices of CNG with that of petrol.

Under the law, gas prices are supposed to be determined biannually after a public hearing by the Oil and Gas Regularity Authority (Ogra).

However, the government disregarded the law and after July continued to raise the CNG prices till the Supreme Court took a suo motu notice of the issue.

On October 25, during the hearing of the suo motu case, the apex court directed the Ministry of Petroleum to reduce the CNG prices that had reached Rs92 per kg in the Potohar region, including Islamabad and Rawalpindi.

Dr Waqar Masood, the petroleum secretary, told the apex court that as a temporary relief the prices would be brought down by Rs30 per kg.

Accordingly, Ogra issued a notification setting the prices in Region 1 (Potohar, Khyber Pakhtunkhwa and Balochistan) at Rs61.64 per kg and in Region II (Sindh and areas in Punjab excluding Potohar) at Rs54.16 per kg.

The secretary also told the court that an entirely new mechanism was being worked out to set the prices which would replace the existing arrangement that had been in place since 2008.

But the new rates as announced by the secretary before the apex court reduced the profit margin of the CNG sellers who promptly went on an announced strike, claiming selling the cheap fuel was no longer a profitable business.

The real impact of the unannounced strike by the CNG operators began to surface from October 30 when the citizens returned from Eidul Azha holidays to find that almost half of the stations were closed.

It is difficult to assess whether the decision to partially shut down supply was dictated by the CNG association or individually.

But the consumers had to wait for hours in long queues at the filling stations.

As the closure of most of the CNG stations created hardship for the public, Dr Asim Hussain, the adviser to the prime minister on petroleum, said selling CNG was still profitable.

“Those who know business are operating and those who want to play politics are manipulating the situation,” he observed.

On the other hand, the All Pakistan CNG Association said only filling stations with low operational costs were managing to operate at minimal profits.

“Those stations which are not on rented land and their overhead charges are less can survive with this unrealistic formula,” said Ghiyas Paracha, the chairman of the association.

As per the decision of the Supreme Court that the petroleum ministry and Ogra needed to devise a fair CNG price, Ogra after its public hearing on November 14 inferred that the price needed to be fixed at Rs74.20 in the region I.

Whereas the independent auditors hired by Ogra in their report presented to the court on November 17 suggested that the CNG price in the region I should be Rs83 per kg.

As a result, Ogra announced its decision to hold another series of public hearing to also take the stakeholders in Karachi and Lahore on board which ended on November 29.

Before any decision could be made, the petroleum ministry sought time from the Supreme Court saying comprehensive gas policy guidelines were being formulated.

Dr Asim Hussain also told the media on December 4 that policy guidelines on the CNG usage were being formulated.

“The use of CNG will be restricted to public transport vehicles and up to 1,000cc cars,” he added.

However, after passing though various stages, the federal cabinet in its meeting on January 3 decided to form another committee to look into the policy guidelines.

The committee is headed by law minister Farooq H. Naek and includes federal minister for capital development and administration Nazar Mohammad Gondal and minister for climate change Rana Farooq Saeed Khan.

As the government failed to come up with a pricing formula, the CNG sellers did not resume full operation till late December when it was decided that gas could not be supplied to the stations due to heavy domestic demand in the wake of the cold weather.

However, when asked why such a decision was taken in the last year of the government, Dr Hussain said the CNG shutdown was necessary due to massive gas shortfall in the country.

“We are already facing a shortfall of around two billion cubic feet daily (BCFD), as the production is around 4.2 BCFD. There is always a time to take tough decision.”

He expressed confidence that the measure to enhance local production and import gas and LNG would start yielding results in 2014.