CNG lobbies in Competition Commission of Pakistan’s crosshairs

CCP raids offices, seizes documents; report to be finalised in two months.

ISLAMABAD: As compressed natural gas (CNG) stations owners continue their strike, the antitrust watchdog conducted raids on offices of the apex CNG association and two other representative bodies to determine whether the decision of keeping stations shut and fixing prices were individual acts or collusion.

The inquiry teams, constituted by the Competition Commission of Pakistan (CCP), carried searches and inspections in Islamabad and Karachi at the premises of the All Pakistan CNG Association, CNG Dealers Association and CNG Stations’ Owner Association of Pakistan and impounded documents, according to a statement.

The inquiry had been initiated after several sources raised suspicion as to the collusive role of the CNG associations in the industry. “It appears that CNG associations have been actively negotiating with the federal government and the Oil and Gas Regulatory Authority (Ogra) on behalf of the station owners to set a price of their choosing,” said sources.

The inquiry committee will have a mandate to conduct investigate as to whether the CNG associations and their members were engaged in anticompetitive practices in violation of Section 4 of the Competition Act, 2010, the CCP said. The committee will finalise the report in two months.

The watchdog said the associations cooperated in search and inspection, adding the inquiry committee impounded documents that will be scrutinised in order to submit its findings before the CCP.

Following the Supreme Court’s directives to the government to revisit the prices of the CNG, the association has gone on strike, multiplying the consumers’ woes. Stations owners have been demanding significant increase in the prices to continue selling gas, while rejecting Ogra’s formula of a 17% increase.

The antitrust watchdog said the anti-trust Act prohibited trade associations from taking decisions on commercial matters such as production, pricing and provision of goods and services. It said the inquiry committee had been entrusted to review the policy framework of the CNG sector to identify policy distortions that were preventing, restricting or reducing competition in the market.

While prices were being fixed by Ogra with the approval of government, it needs to be verified as to what was the role of the associations in negotiating a price with the government and Ogra on behalf of the CNG stations. It will also verify whether the boycott was an individual decision of member undertakings or a collective withdrawal of services through associations to get their demands fulfilled.

The CCP said the strike has resulted in output limitation placing pressure on other competitors, suppliers as well as buyers. “Such conduct may fall within the purview of section 4 of the Act”, warned the watchdog.

Over 2.85 million vehicles are running on CNG, 35% of the total vehicles. There are around 3,300 CNG refuelling stations or 17% of the 20,000 total gas fuelling stations in the world, according to the CCP.

The Natural Gas Allocation and Management Policy places CNG fifth in the priority order for supply of natural gas and the CNG sector takes approximately 9% of the total natural gas resource. Total investment made in CNG sector is around Rs80 billion and according to one of the estimates it created 50,000 jobs.

These factors do highlight the economic significance and importance of the sector for the public at large, said the CCP.

Published in The Express Tribune, December 5^th, 2012.