ECC to examine legal aspects before deregulation of CNG prices
ECC forms committee that will come up with its findings in next meeting
In Punjab, CNG stations have started using imported liquefied natural gas (LNG) and its price is already deregulated at all retail outlets. PHOTO: FILE
ISLAMABAD:
The Economic Coordination Committee (ECC) has constituted a high-level committee for examining the legal and technical aspects that may arise after compressed natural gas (CNG) station operators are allowed to set consumer prices, which will effectively end the role of the regulator in determining gas rates.
According to officials, the committee comprising special assistant to the prime minister on human rights, secretaries of finance, law and justice, petroleum, Federal Board of Revenue chairman and Oil and Gas Regulatory Authority (Ogra) chairman was set up in a meeting held on February 18. It will submit its report in upcoming huddle of the ECC.
Company set up by CNG sector allowed LNG import
The move came after the Ministry of Petroleum and Natural Resources tabled a proposal in the ECC meeting suggesting deregulation of the CNG market and taking away the price-setting role from Ogra.
However, Ogra will continue to monitor CNG prices in order to ensure that these remain reasonable. In case, the prices look unreasonable, consumers are exploited or a cartel is formed, the regulator will intervene for a price revision.
In Punjab, CNG stations have started using imported liquefied natural gas (LNG) and its price is already deregulated at all retail outlets. The federal government plans to extend its scope to other provinces as well where CNG prices are currently regulated.
Officials say as the gas market for CNG stations has been deregulated in Punjab, the entire industry would eventually have to switch to this regime.
Earlier, Ogra had failed to notify revised CNG prices for a long time because it lacked the required strength of members which led to collapse of the CNG industry after its operational cost increased.
“If the plan of deregulating CNG prices across the country is approved, the filling station owners will be empowered to fix retail prices,” an official said, adding this would also spark competition among industry players.
The regulation of LNG market, in contrast to an earlier plan approved by the ECC, has forced the CNG industry to pay higher unaccounted-for-gas (UFG) cost at 11.5% whereas in other provinces the industry is paying 4.5%.
Apart from this, Sui Northern Gas Pipelines is charging varying prices from the consumers and CNG stations are paying a higher price of $12 per million British thermal units (mmbtu) at a time when global markets have dipped.
Ogra had approved a provisional price of $8.6 per mmbtu for LNG based on set parameters including the margins but the federal government allowed the gas utility to collect a higher price under the petroleum development levy ordinance despite the fact that gas prices are determined by Ogra following public hearings under the Ogra ordinance.
On the other hand, the textile industry is paying $10.5 per mmbtu for LNG purchase, but industry people are surprised as LNG prices have come down in the international market.
ECC likely to approve CNG price deregulation
Ogra had fixed the price at $8.9 per mmbtu when LNG rates stood high to some extent but they later came down following a dip in oil rates. Different charges had also been slapped after suspending the third-party access rules framed by the previous government of Pakistan Peoples Party, which allowed only the collection of transmission fee by the gas utilities.
Published in The Express Tribune, February 28th, 2016.
The Economic Coordination Committee (ECC) has constituted a high-level committee for examining the legal and technical aspects that may arise after compressed natural gas (CNG) station operators are allowed to set consumer prices, which will effectively end the role of the regulator in determining gas rates.
According to officials, the committee comprising special assistant to the prime minister on human rights, secretaries of finance, law and justice, petroleum, Federal Board of Revenue chairman and Oil and Gas Regulatory Authority (Ogra) chairman was set up in a meeting held on February 18. It will submit its report in upcoming huddle of the ECC.
Company set up by CNG sector allowed LNG import
The move came after the Ministry of Petroleum and Natural Resources tabled a proposal in the ECC meeting suggesting deregulation of the CNG market and taking away the price-setting role from Ogra.
However, Ogra will continue to monitor CNG prices in order to ensure that these remain reasonable. In case, the prices look unreasonable, consumers are exploited or a cartel is formed, the regulator will intervene for a price revision.
In Punjab, CNG stations have started using imported liquefied natural gas (LNG) and its price is already deregulated at all retail outlets. The federal government plans to extend its scope to other provinces as well where CNG prices are currently regulated.
Officials say as the gas market for CNG stations has been deregulated in Punjab, the entire industry would eventually have to switch to this regime.
Earlier, Ogra had failed to notify revised CNG prices for a long time because it lacked the required strength of members which led to collapse of the CNG industry after its operational cost increased.
“If the plan of deregulating CNG prices across the country is approved, the filling station owners will be empowered to fix retail prices,” an official said, adding this would also spark competition among industry players.
The regulation of LNG market, in contrast to an earlier plan approved by the ECC, has forced the CNG industry to pay higher unaccounted-for-gas (UFG) cost at 11.5% whereas in other provinces the industry is paying 4.5%.
Apart from this, Sui Northern Gas Pipelines is charging varying prices from the consumers and CNG stations are paying a higher price of $12 per million British thermal units (mmbtu) at a time when global markets have dipped.
Ogra had approved a provisional price of $8.6 per mmbtu for LNG based on set parameters including the margins but the federal government allowed the gas utility to collect a higher price under the petroleum development levy ordinance despite the fact that gas prices are determined by Ogra following public hearings under the Ogra ordinance.
On the other hand, the textile industry is paying $10.5 per mmbtu for LNG purchase, but industry people are surprised as LNG prices have come down in the international market.
ECC likely to approve CNG price deregulation
Ogra had fixed the price at $8.9 per mmbtu when LNG rates stood high to some extent but they later came down following a dip in oil rates. Different charges had also been slapped after suspending the third-party access rules framed by the previous government of Pakistan Peoples Party, which allowed only the collection of transmission fee by the gas utilities.
Published in The Express Tribune, February 28th, 2016.