The poor man’s fuel: Regulate the use of CNG, not just the price

The fuel is obviously not being consumed by the right segment of society.

KARACHI:

The merits of the idea can always be argued. There are supporters as well as opponents to the idea of switching to CNG. The efficacy of the idea however needs no argument. The switch to CNG to mitigate or to some extent lessen the economic burden of the masses has failed to bring about the desired results.

I feel the bigger issue is about who actually ends up using CNG. There is the general perception that CNG is a poor man’s fuel and the shift from petrol was initiated to enable the lower income groups to benefit.

However, while that may have happened in some cases, for the most part, the real beneficiaries of CNG, regardless of what price it is being sold at, are those who were never really less privileged or ‘poor’ to begin with. And this becomes quite obvious when one sees long lines of Corollas, Citys, Civics and other expensive cars, including fancy SUVs lined up to get CNG. I tried, I really did, but I could not come up with any economic rationale to classify these people as less privileged.

In fact, the less privileged do not usually own cars. The less privileged do not use taxis and rickshaws. The less privileged either use motorcycles or public transport to get to work or go about their daily commute. And I think we can safely argue in today’s economic environment that anyone who can afford nothing more than a 800cc car also falls within the domain of middle or lower middle class. Motorcycles do not use CNG. And while transporters have made the shift from diesel to CNG in large numbers, fares have not been reduced to reflect this change.

So we have established that the idea is probably flawed, based on the fact that it has not worked. That can be as a result of two things. One is that the idea was based on unsound economic principles to begin with, or the execution was flawed. I believe that in this case the idea was workable, and still is workable. It could have made a change, but the execution was pathetic. I cannot be clearer than that.

But before I go into that, let’s take a second to figure out exactly how much one saves off CNG and if it really is worth the hassle, the conversion cost, and the increased engine maintenance cost. Let’s use some rounded off numbers and peg the price of Petrol at Rs100 and the price of CNG at 90, closer to where it was before the Supreme Court intervened to reduce prices. The reason I am using that as a peg is because current prices are interim, and they will in all likelihood be revised upwards based on the new formula being proposed by Ogra.

On average – barring extreme exceptions – the daily mileage racked by most car owners is usually not more than 50 kilometres. So that means about 5-6 litres of petrol consumed, Rs500 to Rs600 spent. A car running on CNG, would travel the same distance using about 4-5 kilogrammes of CNG. This translates into Rs360 to Rs 450 spent on a daily basis. I have based this on the average consumption of a 1300cc car. This translates into daily savings of Rs150, monthly Rs4,500.

Is this really meaningful for someone who can afford a Rs1.5 million car, or Rs2 million? And factor in the fact that the car owner invested in the CNG conversion kit and also pays more on the maintenance of the engine as a result. It really doesn’t make economic sense to me. Most of us can easily save more than this or even more by resorting to other means like saving on electricity consumption, driving less, carpooling, or buying a smaller car. But I guess this means a measure of self-discipline but that’s no fun is it?

The government has to put its foot down to insist that the savings made by public transport owners - since the shift to CNG and LPG - be passed on to consumers.

The mass-shift to CNG in private cars without any regulation which has resulted in the current shortage is also the government’s fault. They can still fix it. I believe any car with an engine capacity over 800cc should not be allowed to run on CNG. It should be restricted to mass public transport and not even prime movers. It certainly should not be allowed in Civics, Corollas, Citys and SUVs. If one can buy an expensive car, one probably is and should be willing to pay the cost of running it. If you can’t, then buy a smaller car!

Published in The Express Tribune, November 19^th, 2012.