Ogra decision: CNG prices set to rise by up to Rs10.56

Association rejects new pricing mechanism.


Zafar Bhutta November 30, 2012

ISLAMABAD:


Faced with a burgeoning crisis due to closed filling stations, the Oil and Gas Regulatory Authority (Ogra) has decided to raise the price of Compressed Natural Gas (CNG) by up to Rs10.56 per kilogramme in a new pricing formula.


The price hike decision taken on Thursday will be officially notified after receiving advice from the federal government.

The new price will also be presented before the Supreme Court (SC) during the hearing scheduled to take place on December 5.

At present, a majority of the CNG stations across the country remain shut after the drastic reduction of CNG prices by up to Rs31 per kg on the orders of the apex court.

The new hike has been determined following public hearings conducted in Lahore and Karachi after seeking input of all stakeholders.

In its decision sent to the Ministry of Petroleum on Thursday, the regulatory body has determined an increase of Rs10.56 per kg in Region-1 and Rs9.60 per kg in Region-2.

According to the decision, prices will go up to Rs72.20 from the existing Rs61.64 per kg in Region-1, which includes Khyber-Pakhtunkhwa (K-P), Balochistan and the Potohar Region (Rawalpindi, Islamabad, Gujarkhan), and up to Rs63.76 from the existing Rs54.16 per kg in Region-2, which comprises Sindh and Punjab (excluding the Potohar Region).

In the existing mechanism, Ogra had ended the operational cost to be charged by CNG station owners after the decision of the apex court on October 25 that resulted in a major controversy.

The margin was reduced from Rs11 to Rs6.22 per kg. CNG stations remained shut on the pretext that it was not possible to run business at the new notified price.

The All Pakistan CNG Association (APCNGA) claimed that although the SC had directed to cut prices by up to Rs20 per kg in its order dated October 25, Ogra slashed prices by Rs31 per kg.

Dr Asim

In the new pricing formula, Ogra has allowed CNG stations to charge Rs5.46 per kg value addition cost and Rs7.90 per kg operational cost. However, the regulator has made further cuts in the margin of the CNG industry from the existing Rs6.22 to Rs3.42 per kg after amending the rate of return formula.

Under the new mechanism, the rate of return has been linked with the investment made to set up CNG stations instead of the 20% rate of return on cost of gas plus the operational cost.

Subsequently, the government will charge Rs13.25 per kg on account of the Gas Infrastructure Development Cess (GIDC) and Rs11.01 per kg as General Sales Tax (GST) in Region-1. In Region-2, Rs9.18 per kg GIDC will be charged and Rs9.40 per kg GST. When contacted, Ogra’s spokesman confirmed the CNG price hike.

However, APCNGA Chairman Ghyas Paracha has rejected the new pricing formula and said that they were not taken on board. He said that SC had directed Ogra to take a decision after conducting forensic audits but the regulatory body did not follow the directives.

Meanwhile, Advisor to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain told one media outlet that he did not accept Ogra’s price decision and would seek justification for the hike.However, when contacted, Petroleum Secretary Dr Waqar Masood said that the petroleum ministry could not reject Ogra’s decision.

Similarly, Ogra’s spokesman said that gas companies and other stakeholders were taken on board while deciding the CNG price hike and the ministry could not reject this decision as per Ogra Ordinance.

“Another crisis will start if the petroleum ministry rejects Ogra’s decision,” he said.

Published in The Express Tribune, November 30th, 2012.

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