Another hike: Govt considering imposing petroleum levy on CNG
The government is mulling over the imposition of Rs5 per kilogramme as petroleum levy on compressed natural gas (CNG) and reducing margins of dealers as it has been found that CNG stations are earning a profit of Rs22 per kg on sales to consumers.
However, the CNG association has rejected the proposal, saying the business has already been hurt by gas outages and imposition of the levy will deal a further blow to the industry.
“The cash-strapped government will generate Rs13 billion per year through the petroleum levy on CNG, but it will do so by cutting the margin of dealers and therefore, it will not cause an increase in CNG prices for consumers,” a source said.
Earlier, the government had planned to impose petroleum levy on liquefied petroleum gas (LPG) equal to the freight charges imposed on the import of LPG.
Petroleum Minister Dr Asim Hussain held a meeting with officials of Oil and Gas Regulatory Authority (Ogra) on Tuesday to work out a mechanism for imposing the petroleum levy on CNG.
Hussain was surprised to know that oil dealers were charging margins of Re1 to Rs1.50 per litre on sale of petroleum products while operating cost was not part of the pricing formula. However, CNG stations were charging Rs13.99 per kg as operating cost on sale of gas. The minister was of the view that no business in the country was enjoying such a high rate of return.
In its defence, the CNG association argues that they have invested their money in setting up filling stations while in case of petrol and diesel outlets the oil marketing companies have invested.
According to a working, CNG stations are making a profit of over Rs22.21 per kg on different counts including 20 per cent return on investment amounting to Rs8.22, compression cost, cost of maintenance (machinery), cost of lubricant, civil works, depreciation (machinery) and cost of labour. It has been noted that these outlets are charging Rs8.09 per kg as compression cost.
Gas distribution and transmission companies are providing gas to CNG outlets at Rs32.89 per kg in Khyber-Pakhtunkhwa, Balochistan and Potohar region (Rawalpindi and Islamabad) and at Rs29.43 per kg in Sindh and Punjab, excluding Potohar region.
However, consumers are getting CNG at Rs66.42 per kg in region-1 and Rs63.11 per kg in region-2 and the price also includes 16 per cent general sales tax amounting to around Rs7 per kg. Consumers are being charged Rs2.92 per kg as rental/OMC margin and Rs1.05 per kg in various fees and taxes.
Published in The Express Tribune, August 10th, 2011.
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Part of corporate social responsibility of the august trade body of CNG association with advocacy for CNG. The first thing as the figures indicated by the Minister Petroleum was oil dealers were charging margins of Re1 to Rs1.50 per litre on sale of petroleum products while operating cost was not part of the pricing formula. However, CNG stations were charging Rs13.99 per kg as operating cost on sale of gas. The minister was of the view that no business in the country was enjoying such a high rate of return. According to a working, CNG stations are making a profit of over Rs22.21 per kg on different counts including 20 per cent return on investment amounting to Rs8.22, compression cost, cost of maintenance (machinery), cost of lubricant, civil works, depreciation (machinery) and cost of labour. It has been noted that these outlets are charging Rs8.09 per kg as compression cost. Gas distribution and transmission companies are providing gas to CNG outlets at Rs32.89 per kg in Khyber-Pakhtunkhwa, Balochistan and Potohar region (Rawalpindi and Islamabad) and at Rs29.43 per kg in Sindh and Punjab, excluding Potohar region. However, consumers are getting CNG at Rs66.42 per kg in region-1 and Rs63.11 per kg in region-2 and the price also includes 16 per cent general sales tax amounting to around Rs7 per kg. Consumers are being charged Rs2.92 per kg as rental/OMC margin and Rs1.05 per kg in various fees and taxes. I would suggest the FBR to look in the matter of taxation to the CNG stations for the windfall that accrue to the operators of the CNG outlets need detailed investigation for their tax returns being filed. The rationale for value addition for the raw natural gas by compression and value addition. OGRA has no check and balance on the CNG quality of gas in terms of BTU's, and the temperature of the CNG. The windfall of margins has made prey to thousands of outlets with the banking, leasing industry's exposure to this mode of business. The risk of engine being run on CNG which limits the engine life to about 30,000 km. instead of 100,000 or more on gasoline. Hundreds of copanies has abandoned the use of CNG on company fleet of cars as this deteriorates the engine, and gross loss to the company. One of the companies are EFU which has completely prohibition on the use of CNG on its fleet cars to the staff.
CNG is used by mostly people who can afford it and those who have petrol engines: car owners. Fine taxi drivers are affected but they should increase fares across the board.
Gas needs to go to industries that provide jobs that RUN the economy. If there are no jobs, there are no passengers or drivers to buy CNG/petrol in the first place.
CNG stations were the largest scam of the Musharraf era. Infact it was with the money made by Musharraf govt - and possibly the Chief Executive himself from giving CNG allocation. Where do you think the money came for the luxurious residences Musharraf owns in London and Dubai
CNG Stations should be shut down...absolute wastage of such a precious resource which could be much better used for promoting industry and thereby jobs and exports for economic prosperity....also please remember CNG can't be used by motorcyclists so its only the people who own cars who use it so can't really say its a fuel for the poor....
Instead of so big benefit margin greedy CNG station Owners were not ready to discount even a single penny to customer, and they were maintaining pennies on their tables like bus conductor in Karachi.
As consumer of natural gas the entire CNG structure was developed on the deprivation of tax to the Government. The petroleum levy, taxes were not charged. CNG when used in autos., depreciates the engine. On average an engine opens and repair costs around 70,000 to Rs. one lac. Gas being scarce commodity should be used in energy sector, cement, fertiliser plants and not as CNG which can run their cars. The safety, security for gas compression, and gas usage as well as safety for cylinder burst. Pakistan has created a hype for CNG. vendors should propagate safety, and accidental burst of cylinder. Particular care of curently CNG used on old diesel buses making it hybrid engines. being used on CNG with alteration making public safety issue. With inflation, and Rupee under pressure from EUro, Dollar etc., the average cost of a CNG cylinder for car, bus, is a very costly investment. We now have unleaded gasoline, which is safe. We should learn to live now with available resources.
CNG is a local produce and still the consumers have to face long lines and expanding cost for the use of it. Where is country headed to?
this is absolutely ridiculous, consumer prices of CNG should be brought down by cutting down on such exorbitant dealers' margin.
Instead of cutting the throat of consumers, Government and CNG dealers should curtain the margin of profit and the benefit be provided to consumers. The product (CNG) is local and relief shall save millions of dollars while prooting consumption of CNG.
For heaven sake, there is only 4 days of supply to CNG stations at the moment and by reducing the profit margin the government is trying to shatter one of the businesses. I don't understand what will be government getting out of this.