PRICE IMPACT TO BE REASONABLE: MALIK KHUDA BUKSH
TARIQ AHMED SAEEDI (email@example.com)
Dec 03 - 09, 2007
Unlike other prime energy source such as gasoline and diesel, it is rare that prices of CNG witness regular surge. Stability in CNG policies played a positive role in trickling down benefits to masses as well as to the industry. Malik Khuda Baksh, Chairman of CNG Station Owners Association of Pakistan is quiet satisfied with the deregulation regime which allows CNG industry to flourish. Yet, he expressed his fear of being this growth hampered in case of any policy shift during an interview with Pakistan & Gulf Economist. He said industry could not afford it. Seven new gas fields have been explored that will add 40 percent to available natural gas resources. So far, 1400 CNG stations are in operation in all over Pakistan while 1.6 million light vehicles including cars and pick ups have been converted to CNG. Additionally, 250 stations are in the process to be opened, machineries of which have already been imported. These developments have lowered down the petrol import bill to $US 3 billion this year out of total of $US 6 billion. That accounted for a whipping 50 percent cut down in trade deficit. Has there not been growing CNG industry trade deficit would have raised at substantially high level. This has been possible because of growth in CNG sector. He said CNG owners are able to sustain burden of international jitter in oil prices instead of to transfer it to public. CNG has controlled price over the year despite of regular price hike of crude oil in international market. This is because of stability in policies in relation to CNG sector, he said and adding otherwise, we could not keep standing. It is a total private sector investment that has achieved this growth rate. And, also support given by the government has boosted confidence of investors. Government reduced duty taxes on gas cylinders to mobilize the industry. Globally, CNG is encouraged as an alternative energy source to protect environment. Few governments in international market subsidize the sector to the extent that is unmatchable to any other country. Thousand of dollars are offered to attract motorized vehicle users towards CNG utilization.
Illustrating the phenomenon behind absorption of CNG sector of international oil and gas price rise, he said, CNG is regulated by OGRA therefore any rise in oil and gas price in international market is not likely to bring impact on CNG sector. "If OGRA would take it to introduce any change in gas tariffs, in such case price impact of CNG on public would be reasonable, however" he promoted.
Government is subsidizing import of CNG buses for public transport all over Pakistan. The subsidy amount is 80 percent of the total cost of import while only 20 percent was to be invested. Malik Khuda Baksh termed it an unprecedented incentive being offered to mobilize investment. For only Karachi, Rs.10 billion of investment is expected in CNG buses in near future. He has a plan to import 200 pubic buses from Thailand to ply on road of Karachi. Malik hoped that next government would not bring any policy shift. This will cause a reversal in CNG growth, he clarified. If favourable condition unfolds, he said, he is ready to invest in manufacturing of CNG accessories specially those which are being imported.
In a reply to scribe's question, "How could problem of low pressure of CNG be resolved?" He said improvement in infrastructure of supplying natural gas can bring suitable solutions. In winter season, this problem is multiplied to a greater extent that people feel anguish in driving cars on CNG. Basically, CNG pumps require a certain quantity of natural gas to make it compressed. If not available with that quantity the problem occurs. It is due to the size of natural gas pipelines, which often have invariable diameters across the region. Low pressure increases bill of stations also. Infrastructure improvement needs huge investment and cooperation of public. Therefore, it is taking time, he remarked. Distribution network is feeble in Pakistan to exploit potentials of indigenous product.
Rejecting the concept that resources of natural gas are depleting in Pakistan, he informed, country has natural gas resources inasmuch to satisfy industrial, commercial, and domestic demands till 2022. Seven new gas fields have been explored that will add 40 percent to available resources. Above all, import from Iran would be an astronomical addition to fulfil country's need. The tariffs of imported gas would be more appropriate for public, he asserted. He thinks import is the only way to control, maintain, and solidify petroleum industry of Pakistan and to pass on benefits to people. "We can not stick our dependence on crude oil for meeting energy needs of the country for long. Else, economic situation will turn out to be very draconian," he insinuated.
Malik Khuda Baksh completed his primary education in Attock, Punjab. He acquired his matriculation from Fateh Jang, another place in Punjab. After further studies in Lahore, he moved to London for enriching expertise in automobile sector and clinched diploma of one year in automobile engineering in a college located in London. This education enhanced his interest in petroleum industry and helped him to understand prospective growth of the industry. His maiden entry in petroleum business dated back to1973 when he established his first petrol station by the name of Mehran in Karachi. That was the time when analogous-mechanism was used in fuel dispensers at fuel stations promoting often malpractices. Mechanical deficiency interspersed in the mechanism created anomaly in fuel measurement to betray consumers. It was a common complaint raised by consumers at that time. That led him to avail another business opportunity of importing digital dispensers in 90s era. Then he began importing digital fuel dispensers from London to meet an overwhelming demand of them in Pakistan. Initially, Caltex did import such pumps and built up market but later discontinued due to some reasons. Pakistan State Oil, Caltex, other national kitties and private petrol stations alike found it feasible to transform to accurate measuring fuel dispensers from outdated and often consumers-annoying selling outlets. It was a huge success on one hand for him increased his imported dispensers" market share to 65 percent and relieved customers of cheating practices on the other. The various kinds of gasoline were sold to allow surge in mal practices in selling of petrol. Mono-grade standard later set for gasoline vehemently discouraged arbitrary entitlement of petrol to super, hi-octane, etc. Significantly, it slashed down cheating instances. Malik Khuda Baksh holds the title of international director of The International Association of Lions Clubs.
Talking about the CNG Station Owners Association, he said, the association organizes and participates in international conferences and seminars to get updates of CNG sector. In a recent international conference on CNG sector held in Bangkok, growth of Pakistan's CNG sector was highly appreciated by not less than 5000 participants hailing from different countries. These kinds of exposure help transfer of diverse international knowledge to upgrade domestic industry.
Government announced Statutory Regulatory Order in 1998 that attracted enormous investment in CNG sector. The subsequent deregulation reverted outlook of the industry. This waived duty taxes to persuade investors including private and foreign to pour in investment in this growing sector and to get handsome return on investment. When asked why it was not an attraction when HDIP established first CNG station in probably 1980? He replied at that time price disparity between gasoline and CNG was not this much high. Investors didn't consider it as a lucrative business. Presently, this sector is growing so rapidly because of stability in government policies.
He appreciated government decision to pull off subsidy on freight pool. This subsidy was equal to about 16 to 18 billion rupees entrusted for the betterment of petroleum industry and to ensure parity in gasoline prices all over Pakistan. Government subsidized transportation of fuel to different stations in the country. Unfortunately, it was misused by some transporters in connivance of owners of petrol pumps. The fake invoices and manipulated mileages were disclosed to obtain money from government in lieu of transportation while actually commodity never used to move across. He said that his fraternity pulled all strings to make government realized resultant losses national exchequers incurred due to misuse of the subsidy. All credit goes to Musharraf government and his advisors, who always understandably listened to recommendations and demands of industry. Finally, freight pool has been emptied to save additional billion of rupees. The advocates of positive growth of petroleum and oil industry urged the government to expend this amount to strengthen communication and road infrastructure across the nation. He commended role of ex-secretary of petroleum, Abdullah Yusuf in supporting the idea of removing subsidy to freight pool.