CNG stations in Sindh will set their own prices from Aug 6

Filling stations will also sell gas in litres instead of kilogrammes

ISLAMABAD: The compressed natural gas (CNG) industry in Sindh has decided to let filling stations set their own retail prices of gas from August 6 and set aside the role of regulator in the consumption of imported gas - a move that is likely to spark a controversy.

This comes despite the fact that the Economic Coordination Committee (ECC) has not yet approved deregulation of CNG prices across the country.



Representatives of the Sindh CNG industry met Petroleum and Natural Resources Minister Shahid Khaqan Abbasi and requested him to allow the filling stations to set retail prices on their own from August 6.

The Sindh chapter of the association of CNG station operators has also planned to start selling gas on retail outlets in litres instead of kilogrammes, which has a heavier weight.

They will sell CNG for Rs48.20 per litre instead of the current Rs67.50 per kg. According to a formula, the price currently stood at Rs42 per litre, which would go up to Rs48 after deregulation, an official told The Express Tribune.

However, he added, the unilateral fixing of retail prices would be illegal in the absence of approval of the ECC, which is the apex economic decision-making body.

Sindh CNG Association representative Sami Khan acknowledged that CNG prices would be announced in litres from August 6, but pointed out that filling stations in the province had no locally produced natural gas and all outlets would switch to imported LNG.

They had already informed the petroleum minister about the use of LNG in CNG outlets across Sindh, he said. Earlier, the ECC formed a high-level committee for examining the legal and technical aspects that may arise after CNG station operators were allowed to set consumer prices, which would effectively end the role of regulator.

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 constituted in a meeting held on February 18.



It will submit its report for formal approval of the ECC of the proposed plan for deregulating CNG prices in Pakistan.

The committee was formed after the Ministry of Petroleum and Natural Resources floated a proposal in the ECC’s 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 are found to be unreasonable, consumers are exploited or a cartel is formed, the regulator will intervene for a price revision.

In Punjab, the CNG stations have started using imported LNG and its price is already deregulated at all retail outlets. The federal government plans to extend its scope to other provinces where prices are currently regulated.

As the CNG market has been deregulated in Punjab, the entire industry will eventually have to switch to this mechanism, officials say.

“With the deregulation, the filling stations will be empowered to fix retail prices across the country,” the official said, adding it would 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 in Punjab to pay a higher unaccounted-for-gas (UFG) cost at 11.5% whereas in other provinces the industry is paying 4.5% on locally produced natural gas.

Published in The Express Tribune, August 5^th, 2016.

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