CNG price hike sparks controversy

Government blamed for ignoring gas pricing formula.

ISLAMABAD:

The massive hike in the price of compressed natural gas (CNG) has sparked a controversy as some blame the government for ignoring the gas pricing formula and question on what grounds the price has been increased.

Following an increase of Rs7.11, the CNG price has gone up to Rs95.72 per kg in Region-I comprising Khyber-Pakhtunkhwa, Balochistan and Potohar region. In Region-II, which covers Sindh and Punjab, the price has risen to Rs87.44 per kg.

On August 1, 2009, the price stood at Rs49.73 per kg in Region-I and Rs48.54 per kg in Region-II.

Defending themselves, officials of the Oil and Gas Regulatory Authority (Ogra) say they have only acted on the advice of the central government to increase the CNG price to the 60% parity level in relation to the petrol price.

“To make the CNG dearer, the government has enhanced the cost of gas, but this runs contrary to the provision of Oil and Gas Regulatory Authority (Ogra) Ordinance 2002,” a senior government official commented.

“Only Ogra is empowered to make changes to the cost of gas on a six-month basis in line with the ordinance,” he said.

Another official pointed out that the prescribed price of CNG, at which gas is supplied to CNG outlets, had not been increased, only the sale price had been raised to take CNG rate to 60% of petrol price. In doing so, he said, the government increased the gas development surcharge (GDS), a tax that is transferred to provinces.

“The All Pakistan CNG Association and Ministry of Petroleum have an understanding to keep the CNG price at 60% of petrol price and the government enjoys powers to implement this formula by enhancing the cost of gas,” the official said.

However, the petroleum ministry must take approval of the formula from the Economic Coordination Committee (ECC), but no such green signal was sought.

The controversy erupted as the government had no room to increase the gas infrastructure development cess (GIDC) because it already stood at the maximum rate approved by parliament. In the face of this, the CNG price could only be jacked up by increasing the cost of gas.

At present, the government is charging GIDC at the rate of Rs300 per million British thermal units (mmbtu) from CNG consumers of Region-I and Rs200 per mmbtu from CNG consumers of Region-II.

Some industrialists have already won stay orders from courts to block the imposition of GIDC. “There is a strong possibility that the CNG industry will challenge the price rise in the court,” an industry source said.

Published in The Express Tribune, September 2^nd, 2012.