Dec 10 - 16, 2012

PAGE approached Mr Abdul Sami Khan for his comments on the burning issue of CNG. While talking to PAGE, he said the following:

CNG Dealers Association Chairman Abdul Sami Khan was of the view that those who could not sustain losses had kept their pumps closed. He alleged that a number of pumps were forcibly being opened by police. I fail to understand why the government is creating chaos ahead of an election. If a number of pumps were closed in the country then why the gas utility followed its weekly load-shedding schedule. CNG owners and dealers would fight "for the cause of our business and interest of the masses till the attainment of their objectives". He said that the dealers would not accept a backdoor policy of the government to close the entire industry through legislation in line with their motives. He said the ministry and the relevant authorities had presented wrong figures in court that resulted in the Rs30 cut per kilo prices of CNG. He said the wrong figures had been presented in the court despite the fact that independent government auditors had evaluated the operational cost and presented their findings to the oil and gas regulatory authority. CNG dealers could not operate on hefty losses of their business. They were being forced to operate in losses. He demanded a justified profit, not a windfall, to be given to dealers. No sectors could run business while suffering everyday losses, which they had been incurring for the past 45 days.

While comparing the CNG tariff rates with other sectors, he said that CNG station owners paid Rs618.55 per MMBTU for natural gas, while the fertiliser, independent power producers and industrial sectors were provided gas at Rs116.27, Rs460 and Rs460 per MMBTU, respectively. The impression about the CNG sector being given a subsidy was utterly wrong. Instead this sector generated a revenue of Rs80 billion annually for the national exchequer that supported different sectors for having subsidy from the government's side. Also, expenses incurred by CNG owners were relatively higher than all the sectors. The cost on CNG was evaluated at Rs31.09 a kilo whereas the production of electricity by independent power producers, urea by fertiliser companies and products made by different companies were Rs5.84, Rs23.12 kg and Rs23.12 per kilo, respectively. CNG consumption share in overall gas supplies was low among all the sectors. It stood at 9.42 per cent that usually came down to seven per cent due to weekly scheduled closures. The shares of industrial, power and fertilizer sectors constituted 21.78 per cent, 27.52 per cent and 16.6 per cent, respectively. The government has put at stake the jobs of 0.64 million people along with investment of Rs122 million made by CNG dealers and station owners. He said the government should realise that CNG in the vehicles had saved $5.6 billion of the foreign reserves that the natural gas substituted in the imports bills. Almost 100 million people were benefited from the cheap fuel on a daily basis, he said, adding that the government controlled pollution drastically in the environment with CNG industry nonetheless.

A sizable body of research in economics has concluded that interference in the price mechanism is a drastic strategy, but one can devise ways to shape the institutional forces behind markets structure. A good strategy to break cartels, rent-seeking behaviour, and other market weaknesses is by ensuring competition. It implies that authorities remove entry barriers and encourage innovation and invite new producers to enhance competition.

There seems nothing positive towards CNG business in Pakistan. OGRA has appointed auditors who have suggested Rs67/ per kg for Sindh & Punjab and we have agreed with it.