LAHORE, Oct 30: The Supreme Court’s interim order delinking CNG prices from the petrol and reducing its rate is feared to have profound impact on the economy.
“The court order on CNG is going to have long-term implications for the economy just the previous decision overturning the sale of the Pakistan Steel Mills (PSM) had left on privatisation and foreign direct investment (FDI),” a senior executive of a power company, requesting anonymity, told Dawn on Tuesday.
“The court in the PSM case created uncertainty in the economy, shook the confidence of local and foreign investors and stopped the process of privatisation. The CNG decision is also going to produce similar results because it doesn’t fully take into account the overall economic
perspective in which the government had linked CNG prices with the petrol and ignored the negative impact of its decision.”
He pointed out that the government had linked the CNG prices with the petrol in order to discourage its growing use for filling car tanks.
“While it is good that the court has exposed the CNG pump owners by revealing hefty profits they were making in the name of operating costs, the overall reduction in the fuel’s price from 60 per cent to 35 per cent of petrol will encourage its rapid use in the months to come.”
“Soon we will not have gas to generate electricity, produce urea and run factories in Punjab, the province hit adversely by energy shortages, if CNG use was not reduced and eliminated,” said a fertiliser producer.
The fertiliser industry is not getting gas for last seven months and its supplies to the textile industry remained suspended for six months last year against their contractual closure of three months a year.
Similarly, power generation on furnace oil is costing Rs27 a unit against Rs7 a unit if produced from gas. “Our pleas for reducing CNG use and providing gas to the power producers, fertiliser units and textile industry have been totally ignored in the interim order.”
“We have world’s largest fleet of cars running on CNG despite that we are 24th largest producer of natural gas. The gas production is projected to decline after touching its peak in 2016 and we will soon be out of gas before 2030 if we keep wasting the precious resource to subsidise the rich,” he said.
He said if the court wanted to provide relief to the poor, it should have also ordered the government to allow CNG use only in public transport and not in private cars of the affluent. Had the court made its order conditional with providing relief of reduced prices only to the poor, it would have sent a very positive message.”
Until the reduction in its prices under the court order, the CNG pump owners were making a hefty profit of 26 per cent on their sales. It now has come down to six per cent and the owners have pledged “to fight it out in the court for their rights”.
“We must realise that we cannot afford to waste our gas by providing it almost free of cost to the upper middle class and affluent segments of society at the cost of exports and jobs. If the court is interested in helping the poor it should order the government to stop its usage as fuel for private cars and instead direct it to run only public transport on gas,” said the power producer executive.
Several accuse the CNG pump owners of stealing gas. “The unfound gas (UFG) losses of both the gas companies have doubled to 10 per cent from five per cent with the increase in usage of CNG. Our estimate is that the pumps are stealing almost 100mmcfd gas every day from the system,” an official of the SNGPL said. He said the increase in the volume of UFG was almost equal to the rise in its usage.
He said the price of gas, government taxes and pump owners’ profits constituted almost equal share in the CNG price before the Court’s interim order came. Now, he said, the owners profits had been substantially reduced to just six per cent of the consumer price from 32 per cent. The government taxes had also been cut by Rs6 a kilogram while gas price remained Rs31 a kilogram.
A former bureaucrat said the secretary petroleum had failed to protect the interests of the economy by not defending the case properly in the court. The secretary had surrendered without fighting and failed to produce before the court the relevant sections of the Ogra Ordinance of 2009 that allows government to revise the CNG prices, he said.
He said the court would have looked into other aspects of its decision as well had the secretary properly presented the government case and apprised the court of the economic fallout of the decision.
He was optimistic that the court would ensure that gas is used productively in future to turn around the economy, create jobs and provide relief to the poor and not the rich.