CNG pricing battle heats up

November 30, 2012 ISLAMABAD – There seems to be no closer end to the CNG price muddle as commodity dealers have rejected Ogra’s new pricing formula and declared to keep the filling stations shut, leaving the public in the lurch.According to the formula presented by the Ogra (Oil and Gas Regulatory Authority) to the federal government for approval on Thursday, CNG price would be raised by Rs10.56 to Rs72.20 per kg in Region-I and to Rs63.76 in Region-II.

The Region-I comprises Khyber Pakhtunkhwa, Balochistan and Potohar region of Punjab) while the Region-II encompass Sindh and Punjab (excluding Potohar). The suggested prices are Rs2.5 less than the previous proposal presented by Ogra in the Supreme Court, which is hearing a case on CNG prices.The regulatory authority has proposed Rs5.46/kg value addition, Rs7.90/kg operating cost and Rs3.42/kg profit. It recommended that gas price for Region-I should stand at Rs31.09/kg, gas infrastructure development surcharge (GIDS) at Rs13.25/kg and GST should be maintained at Rs11.08/kg. While for Regio-II, gas price should stand at Rs28.40/kg, GIDS at Rs9.18/kg and GST at Rs9.40/kg.Ogra has also asked the federal government to issue policy guide lines regarding the pricing mechanism.

Ogra sources said the new formula would be submitted in the apex court after they get a nod from the Petroleum Ministry – claiming that it had consent of all stakeholders, though they admitted the authority was yet to receive formal input from CNG station owners and their association. But the All Pakistan CNG Association rejected the proposed prices. Bent upon putting more pressure on the government to reduce taxes on the CNG sector, Association Chairman Ghayas Paracha accused Ogra of acting against the Supreme Court’s orders by sending the proposal directly to the Ministry of Petroleum. He also accused the regulatory body of destroying the CNG sector.

An Ogra spokesperson said that the new formula was finalized in the light of SC’s directives. Sources informed The Nation that as per the SC orders, the regulator initiated consultations and public hearings to solicit the public opinion, and then it devised and sent the new pricing formula to the government.

Some sources also said the proposed formula was not final and that they have sent the draft to the CNG association as well for their opinion.But the CNG association said they did not receive any draft of the new formula. Paracha said they had earlier sent three proposals to the Ogra which were not entertained. He also alleged that the regulator has disregarded the proposals presented during the consultations and public hearings. He asked Ogra not to “oblige them with profits till the decision of the Supreme Court” but grant permission to collect gas and electricity bills under third party mechanism.

The CNG owners, who shut their stations on Monday, remain insensitive to customers and say they will not reopen gas outlets till the fixation of prices at their choice. On the other hand, transporters and general public suffering from this self-directed closure has urged the government to ensure its writ and forcibly open the closed outlets to end their miseries.Huge rush could be seen at the few open CNG stations after the Sui gas administration announced to reopen CNG gas supply a day before schedule in Sindh and Punjab, at 9am Thursday morning. Commuters and private motorists were facing trouble in Karachi as long queues at the few CNG stations are causing delays and traffic jams in several areas. In Interior Sindh CNG stations are closed in majority of the cities.

People in Lahore suffer the same fate as most stations continue to remain closed as a result of the strike.A spokesman for the CNG Station Owners Association said station owners could not sell gas at the current price and have decided to keep their filling stations closed until their demands are met. He added that the Ogra has shifted the entire burden on the ‘station owners’ which according to him, was sheer injustice. But some motorists challenged this claim pointing out that the few stations still functioning cannot do so if they suffer any losses.

They said the “CNG mafia” wants to plunder the citizens by earning more than reasonable profit.