Too little too late: Ban on CNG kits may not be enough

Move also puts millions of dollars of investment at.

KARACHI:

Though government has decided to ban the import of CNG kits and cylinders, it has to do much more to make this ban effective enough to control the expansion of CNG sector and the gas shortage in country, industry officials said.

The Economic Coordination Committee (ECC) of the cabinet on Thursday approved the ban on the import of CNG cylinders and conversion kits owing to the rising share of the CNG sector in total consumption of gas. The government has finally realised the fast growth of CNG sector and its role in gas shortage in country, but many analysts believe that it may be too little, too late.

JS Global Capital Limited, analyst Atif Zafar says that banning the import of CNG cylinders and kits is big issue for government because even if government bans it today its impact will not be felt right away as the number of vehicles using CNG is now over 2.7 million.

“On the other hand, the share of CNG use in total gas usage has swiftly touched 11 percent and if we do not control it now, it will rapidly increase in coming years,” he said, adding that government has to do something to control CNG use in private cars. The middle way in this issue for government is to levy heavy duties on the import of CNG kits and cylinders to discourage the use of CNG especially in private cars, he added.

Meanwhile, car manufacturers were shocked by the government move as it will directly hit their car sales. Government officials however say that this decision should have been taken couple of years ago owing to the rapid expansion of CNG sector and its role in gas shortage in country.

Leading car manufacturer, Indus Motor Company thinks that its sales will also be affected after this ban. But the affect on Indus Motors, with a percentage share of 73per cent in the 1300cc category may be negligible compared to Pak Suzuki, which mostly produces 800cc and 1000cc vehicles. This category is expected to take a much bigger hit.

“Another question that arises is the control of black marketing of CNG kits after banning imports. Because if this happens, the idea of an import ban would be a futile activity,” Indus Motor Company, Director Marketing Raza Ansari said.

Raza admitted that the sales of two newly launched Toyota Corolla variants and Cuore -a 800cc car would see sales drop after this ban.

He said that there is no doubt that this ban will affect car sales in country. “But, owing to few ambiguities, the situation is not clear yet. To overcome these difficulties, the representative associations of auto industry will soon meet the government,” he said, adding that some of the difficult questions are how government can control the use of CNG in millions of cars that what carmakers will do of their CNG cylinders and kits already in stock.

Industry officials accept the fact that the government has to do something to control the use of CNG in private cars because the subsidized and cheap CNG should be diverted to the middle and lower-middle class rather than the affluent class which can afford petrol or diesel.

The spokesperson of another leading Japanese car manufacturer Pak Suzuki said that they fear a major setback after this decision, as 80% of their production is based on company fitted CNG vehicles.

“We are requesting the government to save us by not putting the ban on company fitted CNG, in this connection we already requested the government to reconsider the decision,” he said, adding that “If there is no other solution except a ban than please give us the time (at least two years) to change our vehicles from CNG to LPG. Because, this conversion will also need heavy investment, different processes, quality checks and also allow us to utilise our stock which we have at present.”

This decision will not only disturb the present and future investments but also hurt the direct and indirect employment of more than 25,000, he said.

Pak Suzuki is the number one producer of world in online CNG manufacturing vehicles. “We invested millions of dollars for the manufacture of CNG vehicles and also for future development in the industry along with our local vendors also invested millions. Two international manufacturers of gas kits, BRC and Landi Renzo have also invested millions of dollars in Pakistan,” the spokesperson said.

Published in The Express Tribune, December 19^th, 2011.