After encouraging the use of CNG for almost three decades the government has now formally decided to contain this sector’s growth, starting from 2012. The decision is not only worrying for the businessmen who invested heavily in this sector over the years; it is also disturbing for the consumers who use CNG not because it is a green fuel, but because of its economic value and that, too, is diminishing.
Dr Asim Hussain even announced late last year that all CNG stations would be closed for the entire month of January, 2012, in order to reduce CNG consumption in the country. The tough official stance against the CNG sector was also supported by eight fire accidents in CNG-fitted public transport in December and November 2011 and, the interior minister, after intervening in the matter, announced that the CNG would be banned in public transport.
As the rift deepened between the government and the CNG sector, some accusations hurled at the CNG sector ultimately led to a clash between the two. But how realistic are these accusations? Are they just myths created by the government to reduce CNG and divert gas to other sectors?
The main accusation made by the authorities is that CNG is eating up all the gas in the country. In recent years, the winter season has seen severe gas shortage especially in the Punjab and residents came out on the streets to protest against prolonged gas load shedding. The official version was that CNG stations were causing gas shortages. However, this is strangely odd since the CNG sector was consuming around nine per cent of the gas in Sui Northern Gas Pipelines Ltd. (SNGPL).
The average sales in the SNGPL system, which operates in the Punjab and Khyber Pakhtunkhwa is around 3,000 million cubic feet daily (MMCFD), while the consumption of the CNG is around 240 MMCFD.
The other major non-domestic gas users in the SNGPL system are industries (21 per cent), power (24 per cent) and urea (between six and 17 per cent) depending on the availability of gas. The domestic consumption accounts between 36 and 40 per cent. CNG is making enormous profits and their share in the revenue is limited According to the petroleum ministry the profit margin for CNG was around Rs28, when the retail price was Rs66 per kilogramme. The CNG association has openly challenged the statement and said that the average profit was Rs9 per kilogramme, while one CNG station owner has even offered to gift his station to the minister if the profit margin was Rs14 per kilogramme.
What is strange is that the petroleum ministry is criticising CNG of making exceptionally high profits, whereas the CNG pricing formula has been formulated by the petroleum ministry, and it is not even placed on the OGRA website.
“We have the oil pricing formula at the website but it is the government’s decision not to place the CNG pricing formula on the website,” said an OGRA official.
However, taking this as an excuse the petroleum ministry made a unilateral decision to have a CNG-petrol price parity. As a result, the cost of CNG has shot up to close to Rs100 per kilogramme now. Whereas, the All Pakistan CNG Association (APCNGA) has said that the government was making huge amounts of money from the CNG sector as their gas tariff is the highest.
As per the OGRA notification, the gas tariff for CNG as on Sept 1, 2012, is Rs684.09 per million British thermal unit (MMBTU) and the gas infrastructure development cess on CNG is Rs263 per MMBTU. In comparison, the tariff on industries, captive power plant is Rs460 per MMBTU and the cess is Rs5 per MMBTU. Urea tariff is Rs116.27 per MMBTU and cess Rs197 per MMBTU.
With the consumption of 9.1 per cent gas, CNG was contributing around 22 per cent of gas revenue in the country.
Another key notion given by the authorities is that gas is a precious resource and the nation is burning it in vehicles, but there is no answer to the basic question — can the country afford additional import of petrol or should people stop travelling?
Similarly, none of the provinces or federal capital has an effective and efficient mass transit system so that the commuters may stop using their cars and commute by public transport.
Besides, the second option being introduced by the petroleum ministry is usage of Liquefied Petroleum Gas (LPG) in vehicles. But given the example of the CNG where the investors fear doomsday for their business, why will the private sector enter a new trade and risk another worthless government policy in the coming decade?