Fixing the price of CNG

There is no getting away from fact that gas reserves are depleted, we have no option left but to reduce CNG demand.


Editorial December 21, 2012

The Supreme Court’s verdict in the CNG case is an unfortunate triumph of populism over economic reality. By declaring the Oil and Gas Regulatory Authority’s (Ogra) pricing formula for CNG null and void and disallowing the price increase, the Supreme Court has tied the government’s hands. There is no getting away from the fact that our gas reserves are depleted and after many years of subsidy we have no option left but to reduce the demand for CNG by increasing its price. Simple demand and supply economics tell us that at the current price we will soon face an acute shortage of gas. Asking Ogra to come up with a “people-friendly” pricing formula, the Supreme Court has hastened our upcoming gas woes.

Easy though it would be to pin all the blame on the Supreme Court, the fact is that Pakistani vehicles have become the biggest guzzlers of gas in the world and it is impossible to change this reality overnight. A decade of CNG promotion by the Musharraf government, which was too short-sighted to ever envision a day when gas would run out, has left us dependent on cheap gas and this is not a habit we can easily break. Already, the price of CNG has tripled in the last few years and this is not a situation consumers would continue to tolerate. The Supreme Court is reflecting the will of consumers and so the government will have to find a solution other than price increase.

Since gas rationing will likely lead to even more anti-government sentiment, both by voters and the Supreme Court and as we have a finite supply of gas, we will have to look outwards to meet our needs. The obvious solution here is to finally get the ball rolling on the Iran-Pakistan gas pipeline. This, though, would require defying the US and having to deal with the possibility that this pipeline could be adversely affected if the US or Israel goes to war with Iran. An alternative is the TAPI pipeline although this too would be vulnerable to attack by extremists and separatists in Afghanistan and Balochistan. With a fixed price and dwindling supply, importing gas is the only available option.

Published in The Express Tribune, December 22nd, 2012.

COMMENTS (2)

Nouman Qaiser | 11 years ago | Reply

If you need to control demand, you donot do it by letting the politicians looting the public to destroy and plunder what ever remains of this poor public. poorly debated, What is more suitable to protect resources and control demand is to ban CNG for above 1000C cars, or some other measure rather then allowing the so called "ogra" to calculate it rubbish formulas that have been filling the politician's pockets rether the the treasury. Just ration CNG, ban it for private use if too short

Kosher Nostra | 11 years ago | Reply

Populism is another word for democracy and only used to portray democracy in negative sense.

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