THE CNG pump owners are worried over the risks they face from what they see as the government shifts its focus on promoting liquefied petroleum gas.
They recall that in early 1990s the government had encouraged setting up of CNG pumps assuring a price differential of 50 per cent with petrol. It had also waived off duties and taxes on import of kits. The earlier policy was initiated while the government’s was aware of the size of natural gas reserves and its consumption by various sectors.
Now it is trying to narrow the difference between GNG and petrol prices gradually bringing the former at par with petrol, and restricting its supply to force consumers to switch over to other fuels.
Unfortunately LPG is the only fuel whose price has been indexed to the international price benchmark of Saudi Aramco Contract Price which, at times, is higher than the international price of oil.
In the auto sector especially Pak Suzuki Motor Company Limited (PSMCL), rolling out 80 per cent vehicles with factory-fitted CNG kits and cylinders, was badly affected when the government banned import of CNG kits and cylinders in December 2011. The company suspended booking of CNG fitted vehicles from February 15, 2012.
An official in the PSMCL said that orders for taxi scheme from Punjab government provided a good support otherwise the situation would have been worse. The company would complete delivery of the petrol version of around 18,000 Suzuki Mehran and Suzuki Bolan by end ofthis month out of total target of 20,000 units (from October 2011 to June 2012).
After the ban the conversion of vehicles into CNG continued to drop depending on the availability of kits and cylinders with the dealers. Thebusiness of importers and suppliers has also been hit.
Malik Khuda Bakhsh, President CNG Station Owners Association, said while investment in the sector stands at Rs108 billion, billions of rupees have been invested in the conversion of 2.7 million vehicles from petrol and diesel to CNG. The government collects revenue of Rs240 million per annum while Rs222 billion is saved annually with usage of CNG instead of petrol, he said.
He fears that thousands of direct and indirect jobs will be at stake in 3,600 CNG stations countrywide from the policy shift to promote LPG.
“The government has taken this decision without keeping in mind that LPG is a costly imported fuel and its uninterrupted availability at current prices would be a problematic issue. As against LPG, we can rely more on locally-produced cheaper and environment-friendly CNG fuel,” Malik added.
Shifting from CNG to LPG would be a long-term process requiring new investments. He estimates LPG import to cater to a large number of vehicles will be over six billion dollars every year.
The transport sector accounts only 7.7 per cent, out of which gas consumption of new vehicles is estimated at 0.38 per cent of total natural gas consumption in the country,” he noted.
He claimed that a car that runs 14 km on one litre of petrol, covers 11 km in one litre of LPG and 21 km in one kg of CNG.
Contesting the savings factor in LPG versus CNG, chairman All Pakistan LPG Distributors Association Abdul Hadi Khan said an 800cc vehicle can run 100 km in 11.5 kg LPG cylinder.
He said there would be no problem in availability of LPG in future as it could easily be imported besides local production. People would continue to rely on CNG because of local production.
Besides in auto sector, he said, LPG was also used as fuel where natural gas was not available.
Spokesman for the LPG Association of Pakistan, Belal Jabbar, said if the government seriously wanted to promote the use of LPG in cars (autogas) it must announce a pricing formula to allow LPG to compete with petrol and diesel. A minimum discount of 65 per cent from the price of competing fuels such as petrol must be allowed to encourage people to convert to LPG.
While issuing licence for autogas stations, the government is required to maintain a minimum distance between stations so that the fate of LPG is not the same as that of CNG. Lastly, LPG can be easily transported via road through tankers and also imported if needed.
The number one hindrance in establishing autogas stations is a lack of pricing policy. Unless there is a clear cut incentive for people to convert their vehicles to LPG, investors will be reluctant to set up stations. Another obstacle is that an autogas station must obtain a licence from OGRA and the Department of Explosives; both have rules that are inconsistent with one another and requires immediate attention.
He welcomed the initiative of Sui Southern Gas Company Limited (SSGCL) to enter into the LPG business as it will lead to healthy competition and benefit the consumer. There are already 91 private sector LPG companies, with SSGC being the 92nd.
Belal believes that LPG is usually more expensive than CNG, but not always. It is also a fact that LPG is always cheaper than petrol. About 14 million vehicles operate on LPG which is widely accepted alternative fuel after petrol and diesel. One kilo of LPG, currently costs Rs95 which can run an 800-1300cc vehicle for 22-25 kilometers, he claims.
Unlike the CNG sector, only licensed LPG companies and oil marketing companies are allowed to set up autogas stations. The existing CNG stations can also set up LPG facilities but possibly in partnership with an existing LPG marketing company for product supply.